While we are getting a tech rally Wednesday thanks to Advanced Micro Devices , this is the month when rotation became more than a one day event. We are going into the last day of the month with the S & P 500 little changed in July, but everything else further down the market capitalization scale having a fine summer: Major indexes in July S & P 500: +0.7% S & P 500 Equal Weight +4.8% Russell 2000 +10% S & P Midcap +5.
3% Why is this happening? Since small-cap companies often have more debt and higher borrowing costs, the expectation of lower rates is certainly a factor. But valuation plays a part as well. Large cap stocks, particularly tech, have grown their valuations much faster. I noted weeks ago that more fundamentally inclined investors were worried about the slower rate of earnings growth for big cap technology stocks .