The rotation to small caps started on July 11th and continues, with the Russell 2000 outperforming S&P 500 by 12% and Nasdaq-100 by 16%. Investors are looking at stocks worth at least $500 million, up 30% or more since July 11th, for clues on the impact of new rate cuts.
Investors are turning to small cap stocks due to the potential for more upside. Smaller companies previously struggled, leading to a shift towards strong-growth stocks like Meta, Amazon, and NVIDIA. Lower rates postulated from rate cuts can benefit small companies more significantly in various industries like renewable energy and home builders.
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