Remember when your little cousin suddenly got taller than you over summer break? That’s basically what happened to small-cap stocks last week, and honestly, it’s kind of beautiful to watch.
The markets threw themselves a proper Thanksgiving party, with the S&P 500 up 1.6%, the Dow climbing 2.1%, and the NASDAQ gaining 1.5%. But here’s the plot twist nobody saw coming: small caps absolutely stole the show, with the Russell 2000 jumping 5%. That’s like showing up to karaoke night and accidentally becoming the headliner.
So what happened? Well, the short sellers basically ghosted the market to go home for turkey dinner (probably to apologize to their moms for being so disruptive all year). When the pessimists take a break, funny things happen – like the biggest Thanksgiving rally since 2012.
But here’s where it gets interesting: this small-cap surge isn’t just a holiday sugar rush. It’s what market nerds call an “early January effect,” which is basically when smaller companies start flexing before the new year even hits. Think of it as the financial equivalent of getting your New Year’s resolution started in December.
Why should you care? Because small caps going beast mode usually signals something bigger brewing. These companies are like the canaries in the economic coal mine – when they’re singing, it means business conditions are about to get really good.
And speaking of getting good, 2026 is shaping up to be absolutely wild. We’re talking about a perfect storm of previously announced deals finally coming together: massive data centers, semiconductor factories, and enough AI infrastructure to make your head spin. Some analysts are predicting 5% GDP growth, which in economic terms is like hitting a grand slam while riding a unicorn.
The real kicker? We’re approaching what some are calling the “Economic Singularity” – that moment when AI stops being a cool side project and becomes the main driver of how everything works. It’s like when smartphones went from “neat gadget” to “how did we ever live without these?”
Now, before you start throwing your money at every small-cap stock with a pulse, remember that markets are moody teenagers – they can change direction faster than you can say “Federal Reserve rate cut.” The Fed’s meeting next week, and depending on what they decide about interest rates, this whole party could either keep going or turn into one of those awkward moments where the music stops.
But here’s the thing about small caps having their moment: when they run, they really run. These companies have been waiting in the wings while the big tech giants hogged all the attention. Now that investors are remembering they exist, it’s like watching the understudy finally get their shot on Broadway.
The bottom line? This Thanksgiving rally might just be the appetizer. If the small-cap surge is any indication, 2026 could be the year when the little guys finally get their due – and the rest of us get to enjoy the show.
Just remember: in markets, as in life, sometimes the best surprises come in small packages.