Big tech is cracking but small caps are having their best year since 1991 — rotate into the little guys
While mega-cap tech stocks like Palantir are having their worst months in years, smaller companies are quietly having their best run since 1991. The latest inflation data came in cooler than expected, which is especially good news for smaller companies that are more sensitive to borrowing costs. This is a classic 'passing the baton' moment where money rotates from the giant names to the little guys.
Idea
Small caps are on pace for their best first-half since 1991, and the macro tailwinds are building. The Fed's preferred inflation gauge came in cooler than expected, damping rate-hike fears — small caps are the most rate-sensitive segment of the market because they rely more on borrowing. Meanwhile, mega-cap AI stocks like Palantir are getting crushed even during an 'AI boom,' suggesting investors are rotating capital away from crowded mega-cap tech and into smaller, cheaper names. This is the beginning of a market broadening-out.
Advanced analysis
With IWM's 10-day momentum at minus 1% and the strategy requiring minus 5%, what specific market event could close that 4-point gap and activate the signal?
How far does IWM need to fall before the small-cap rotation entry conditions are actually met?
With small-cap constituent revenue growth above 265% on a look-through basis and mega-cap AI names faltering, is this the moment small caps finally take the baton?