Traders Dump Big Tech Stocks for Small-Cap, Mid-Cap, and Transport Plays as Year Closes

Wall Street's year-end rotation hits overdrive—capital floods out of tech titans and into overlooked corners of the market.

The Great Unwinding

Portfolios get reshuffled. Money moves from mega-cap darlings toward smaller, nimbler companies and the backbone of the physical economy. It's a classic risk-rebalance, fueled by valuation concerns and a hunt for the next big thing.

Follow the Money (Or What's Left of It)

The shift signals more than just profit-taking. It's a bet on economic resilience, on companies closer to the ground. Transport stocks rise on logistics demand, while small and mid-caps lure investors with growth stories not yet priced to perfection.

One cynical observer might note this annual ritual often feels less like strategic genius and more like fund managers scrambling to window-dress their year-end reports. Yet the movement is real, redrawing the battlefield for the opening quarter. Where big tech stumbles, opportunity—or at least a different kind of volatility—awakens.

Strategas, BofA push clients toward value plays

Jason De Sena Trennert, co-founder of Strategas Asset Management, has been telling clients to buy the equal-weighted S&P 500, which spreads weight more evenly across all 500 stocks rather than concentrating it in mega-caps.

Jason said the White House under President Donald TRUMP is expected to push forward a tax package that would lift consumer demand and capital investment. He also pointed to the upcoming World Cup, which he said could help drive broader economic and corporate growth next year.

Jason’s view was echoed by Michael Hartnett, chief investment strategist at Bank of America, who told clients Friday to lean into cheap mid-cap stocks with strong exposure to the economic cycle.

Michael argued the Trump administration WOULD likely act to keep inflation and unemployment under control, which would support sectors like retailers, real estate investment trusts, homebuilders, and transportation firms. He made clear the upside now rests outside the tech names.

That shift already showed up clearly in November’s performance breakdown. The equal-weight S&P 500 climbed 1.7%, beating the cap-weighted version’s 0.3% gain.

The top 50 stocks in the S&P dropped 0.6%, while the other 450 names ROSE 1.3%, based on BofA’s latest breakdown. It was a decisive break from the narrow leadership that defined most of the year.

JPMorgan warns profit-taking could pause rally

Not every firm is betting this rotation will continue straight through December. A team of strategists at JPMorgan, led by Mislav Matejka, flagged the risk that traders may start taking profits right after the Federal Reserve’s expected rate cut this Wednesday.

Right now, there’s a 92% chance priced in that the Fed will MOVE to lower borrowing costs, after a series of positive policy signals over the last few weeks.

“Investors might be tempted to lock in the gains into year end, rather than be adding directional exposure,” Mislav wrote in a note. “The cut is now fully in the price, and equities are back to highs.”

Still, the JPMorgan team remained upbeat on the medium-term picture. They said a dovish Fed, low oil prices, falling wage growth, and easing tariff tensions will give the central bank plenty of room to act without triggering inflation. They see that backdrop supporting further equity gains, just not necessarily this month.

Beneath the surface, health care led all sectors in November with a 9.1% gain, while information technology fell 4.4%, making it the worst performer. Communication services and materials also moved higher. Value outpaced growth and every other factor last month, reversing a long underperformance stretch.

Momentum stocks, which had been the big gainers earlier in the year, stumbled hard. Savita Subramanian, head of equity and quantitative strategy at BofA, said this may show a “change in leadership, as established outperformers give way to former laggards.”

The push into underloved names isn’t slowing. Scott Rubner of Citadel Securities told clients Friday that these rotations are still active, with the Russell 2000 beating the S&P 500 and Nasdaq 100 on several days. He said it’s a sign traders are moving beyond just chasing Big Tech.

The rotation kicked off after disappointing AI-related earnings from major tech firms last month, which raised red flags about future AI spending.

That gave traders a reason to step back from high-priced growth stories and finally give room to the stock names that had lagged all year. Now those forgotten names are the ones pushing the market higher.

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