Small Caps Will Outperform the “Magnificent Seven”

Evidence:

• Market Rotation: There is growing debate among analysts about whether large-cap tech will continue to lead or if small caps will rally, especially as the “Magnificent Seven” lose momentum.
• Diversification Benefits: Morningstar and other analysts highlight the importance of diversifying by market capitalization, with small caps offering attractive valuations and potential for higher returns as leadership rotates.

Unique Take:

The underperformance of mega-caps and the reversion to mean for growth stocks create a rare opportunity for small caps to shine, especially in a volatile environment where investors are looking for new sources of growth.