Market Rotation from Big Tech to Small-Caps Signals Shift in Trader Sentiment

Traders are closing the year with a dramatic pivot away from Big Tech stocks, favoring small-cap, mid-cap, and transport equities instead. What typically serves as a portfolio cleanup has evolved into a full-scale rotation into undervalued sectors. Since November 20, the Russell 2000 Index has surged 9.4%, hitting a record high, while micro-caps leaped 12%. A basket of airlines, shipping, and trucking stocks climbed 11%, outperforming the S&P 500’s 5.1% gain as tech momentum waned.

The AI trade that propelled tech giants like Nvidia and Microsoft earlier this year is losing steam. Investors now anticipate accelerated US economic growth in early 2026, driving capital toward value stocks tied to tangible activity. Strategas Asset Management’s Jason De Sena Trennert is advising clients to embrace the equal-weighted S&P 500, betting on broader market participation over mega-cap concentration. A potential Trump-era tax package and the 2026 World Cup are cited as catalysts for renewed demand and investment.