Why small cap stocks could be overdue for a breakout rally

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Lou Basenese Nouvelles

Russell 2000,Tech Stocks

The Russell 2000 (^RUT) small-cap index has previously been suggested as an alternative to large-cap tech stocks that have dominated Wall Street in recent...

to large-cap tech stocks that have dominated Wall Street in recent years. While the tech rally stalled in early August, could it be time for another breakout for small caps or Big Tech?

"The Russell 2000 has about 20 to 30% concentration in biotech. I think you want to look there because Big Pharma has to replace their their portfolio of drugs. It's happening. There's a patent cliff," Basenese explains."But outside that, I think a really simple kind of rule of three, focus on the big trends. What's propelling the large cap? So you've got AI cloud computing, cybersecurity, weight loss drugs, immunotherapies.

But here we are again since Thursday, Friday of last week, we're really back to testing that 52 week high of around 228.Obviously, we've had rate cuts beyond that though, in order to keep this momentum going, I guess, how do you then walk that fine line of seeing opportunity because there is rate cuts, but then also offsetting maybe some of the reason as to why the rate cuts are happening, which is a weaker economy.

So you're gonna see a, you know, people say it's a rotation, it's really not a rotation from large to small, it's just a allocation from cash to more risky assets.So I think I've been early saying it's time for small caps 68 months ago and wrong.

Just because obviously small caps, you got a lot to choose, there's a lot to choose from the Russell 2000 has about 20 30% concentration in biotech.It's it's happening, there's a patent cliff, but outside that I think is really simple kind of rule of three right?So you've got A I cloud computing, cyber security, weight loss, drugs, immunotherapies, those same tail winds for the big caps are gonna be tail winds for the small cap.A large cap doesn't, could be a new product.

 

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