Group 1 - Technology stocks and small caps experienced gains on Thursday, indicating a positive market sentiment [1] - Longer-term Treasurys saw a decline for the second consecutive day, suggesting a shift in investor preferences [1]

Thus far in 2026, the Russell 2000 is outpacing the S&P 500, and I believe there is a good chance small caps could continue to outperform, as it seems stocks like Nvidia ( NVDAAnalyst’s Disclosure:I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no busines ...

Core Viewpoint - The market is expected to experience increased dispersion among MAG7 stocks in 2026, with a shift in focus from AI infrastructure providers to adopters of AI technology [1]. Market Performance - Over the past 6 months, only 17% of S&P constituents outperformed the index, but this figure rose to 61% in the last month, indicating improved market breadth [2]. - Small-cap stocks, represented by the Russell 2000, have shown the best improvement in breadth compared to both 50-day and 200-day moving averages [3]. Economic Indicators - Recent flash PMI data has been disappointing, suggesting potential challenges for the market narrative [4]. - The economy is showing signs of slowing, which is expected to continue into 2026, although earnings have not yet weakened significantly in line with macroeconomic data [5]. Earnings and Valuation - Since August, there has been a halt in aggressive multiple expansion, with earnings growth continuing to accelerate [6]. - The Russell 2000 index has seen a significant increase in unprofitable stocks, which are up 62% since April 8, compared to a 29% increase in profitable stocks [8]. Investment Strategy - It is recommended to avoid unprofitable lower-quality segments within small caps and to focus on higher-quality profitable segments [9].

Core Viewpoint - The small-cap sector is showing significant momentum, with the S&P 500 up 17.1% and the Russell 2000 up 14.8%, indicating a potential for strong earnings growth in 2026 [1] Small Cap Performance - Small caps have experienced a profits recovery, with positive growth and upward revisions in earnings expectations [3][4] - Historical data suggests that after significant moves in the Russell 2000, there is a tendency for continued positive performance, with a 29% increase expected a year later [5] Investor Behavior - There is a notable increase in buying activity from various investor types, including retail and institutional investors, driven by the momentum in small caps [6] - The supportive Federal Reserve policy, including rate cuts, is beneficial for small-cap companies that are more leveraged [7] Market Conditions - The overall market sentiment has improved due to reduced uncertainty regarding tariffs and favorable earnings recovery [8][9] - M&A activity is increasing, particularly in the healthcare sector, which is positively impacting small-cap sentiment [9] Valuation Insights - While small caps are trading slightly above average valuation multiples, micro caps are trading 80% above average on sales multiples, indicating potential overvaluation in the micro-cap segment [11] - The expectation is for small caps to outperform larger caps, with earnings growth driving returns rather than price appreciation [16] Earnings Growth Expectations - Earnings growth for small caps is projected to be around 20%, compared to mid to low teens for large caps, suggesting better returns for small caps in the upcoming year [16]

Core Viewpoint - The small cap market is showing signs of a potential breakout, with the S&P 600 index nearing its all-time highs, indicating possible upside for small cap investments [2]. Small Cap Performance - The Russell 2000 index achieved new all-time highs in September, but the S&P 600, which includes a profitability component, struggled until recently [2]. - Small caps are currently at levels similar to those seen four years ago in November 2021, suggesting that if the recent breakout holds, there could be significant upside potential [2]. Market Dynamics - There is a noted relative weakness in some of the MAG 7 stocks, particularly Nvidia and Meta, which may impact overall market performance [3][6]. - The ratio of small caps to MAG 7 stocks is beginning to break out of a multi-year downtrend that started in 2022-2023, indicating a shift in market dynamics [3]. Future Outlook - Despite the relative underperformance of MAG 7 stocks, there is still potential for small caps to perform well as long as other market segments continue to participate positively [5]. - The current pullbacks in major stocks like Nvidia and Meta could signal a trend change, particularly for Meta, which is showing signs of weakness [6].

Core Insights - Small caps have recently outperformed larger caps, indicating a potential shift in market dynamics as they enter a historically strong period [1][2][4] - The Russell 2000 index, representing small caps, is expected to perform better than the Russell 1000, which includes larger companies, over the next few months [2][7] Index Overview - The Russell 2000 consists of approximately 2,000 stocks with market capitalizations under about $4.5 billion, while the Russell 1000 includes larger stocks with market caps over $10 billion [2][3] - Historical data shows that small caps tend to outperform large caps from mid-December through early March, although they may experience greater volatility [4][7] Performance Metrics - A chart comparing the Russell 2000 to the Russell 1000 indicates that small caps are approaching a favorable performance zone, which could signal continued outperformance [5][6] - The iShares Russell 2000 ETF has tested a key resistance level at 240, with previous attempts to break above this level resulting in sell-offs [9][10] Market Dynamics - Small caps are more closely tied to the U.S. economy and are more sensitive to interest rates and credit conditions, leading to greater swings in performance compared to large caps [7][8] - Large caps benefit from global revenue streams and stronger balance sheets, making them more resilient during economic downturns [8] Investment Considerations - Investors are advised to monitor whether the Russell 2000 can maintain its position above the 2400 level and if small caps can continue to outperform despite potential pullbacks [10][11] - Stock picking in the small cap space requires thorough research due to lower analyst coverage, emphasizing the importance of strong balance sheets and fundamental analysis [8][11]

Market Drivers - The current stock market is significantly influenced by three main factors: tariffs, interest rates, and AI [1] Analyst Background - The author has an average stock return of over 30% from articles over a one-year period and has experience as a Credit Manager for a mid-sized publicly traded bank [2] - The portfolio consists of 50-75% deep value stocks, primarily in small caps [2]

Joining us now is Tom Lee. He's Funst Strat's head of research and a CNBC contributor. It's good to see you joining us from the nation's capital today.So, what's your take on everything that we are talking about now daily. Uh, well, I I heard the earlier segment, Scott, and I I do think I'm kind of more in the Jamie Diamond camp, you know, that uh the in Steve Leeman's point that there's opacity in private credit. And that's the problem that investors are going to grapple with for some time. And I think tha ...

Market Trends - Small caps are hitting record highs, indicating a shift in investor interest towards cheaper alternatives compared to mega-cap tech stocks, suggesting potential for gains [1][2] - Small caps are more sensitive to interest rates, and lower rates could provide momentum for sustained growth, especially if further rate cuts occur [3] Inflation and Consumer Spending - Recent reports indicate that tariffs are increasing prices, with high-income consumers spending on luxury items while lower-income consumers seek discounts [4][5] - There is concern about inflation impacting profit margins, as companies may either absorb tariff costs or pass them onto consumers, which could hurt revenues [5][6][7] - Despite inflation concerns, revenue growth remains strong, particularly among high-end consumers, as evidenced by positive results from luxury brands [8][9][10] Corporate Credit and Investment Sentiment - Notable investors are shorting corporate credit in developed markets, citing tight spreads, which raises questions about market stability [11][12] - The sentiment among banks remains bullish on the economy, with reports of healthy consumer spending and zero loss provisions from major banks [14][15] - While there are red flags such as tariffs and narrow spreads, there are also positive indicators driving the economy forward, suggesting a mixed outlook [16]

Group 1 - BlackRock is actively involved in a data center deal, indicating strong performance across passive, active, and alternative investment strategies [1] - Small-cap stocks are expected to experience volatility until the end of the month, but a potential catch-up trade is anticipated post-Fed meeting and China trade deal discussions [1] Group 2 - Victoria's Secret is undergoing a long-term turnaround with the involvement of activist investors, suggesting potential for future growth [2] - There is interest in semi-equipment companies, with existing investments in Lamb and KLA, and developments noted in Pterodine [2]