You’ve probably already seen in the media and from my posts here the past several months that metals, emerging markets, and international markets have performed well recently.
You know what else has performed well?
Small caps.
Chalk one up for the little guys.
When I say little, I mean little in comparison to companies like Google, Microsoft, and Apple.
Companies that fit the “small cap” category aren’t that small. After all, they have a market cap generally between $250 million and $2 billion, but that is small potatoes compared to the trillions in market cap of some large cap companies.
Through the first twenty-seven days of January, they have outperformed the big boys.
If a rotation from small caps to large caps occurs among institutions—even a small one—it could be positive for this area. One investment bank notes:
A change in allocations with modest implications for the S&P 500 can have large implications for smaller indices. For instance, a rotation of 1% of S&P 500 market cap to the Russell 2000 would represent 19% of market cap for the small-cap index.1
Who knows whether a rotation will occur, but it’s something to keep an eye on.
Why? Because this has taken place throughout history. Fidelity shows that there are several periods where large caps and small caps switch back and forth on which outperforms.
That said, the profits of the biggest companies in the large cap space now are startling and historic:
A million dollars a minute is hard to wrap one’s head around.
There is a reason why so much money has been made for those who have invested in tech behemoths.
Small cap stocks are not without their risks, either. The drawdowns can be bigger than their large cap big brothers, on average.
We shall see whether small caps can keep up their streak or whether the goliaths of the stock market will continue their steady performance.
None of this means small caps are best for you, but it serves as a reminder of how diversification works within investment portfolios across historical patterns.
---
Sources:
- Quote and Chart taken from Blaine Rollins’ Weekly Research Briefing, January 27, 2026. Accessed online: https://www.hamiltonlane.com/en-us/insight/weekly-research-briefing/weekly-research-briefing-even-more-isolated
- “The Case for Owning Small Cap Stocks”, Summer 2025. Accessed online: https://clearingcustody.fidelity.com/app/proxy/content?literatureURL=/9920885.PDF