Remember when everyone was obsessed with the Magnificent Seven tech giants? Well, plot twist: the little guys are stealing the show.
While you were probably doom-scrolling through Davos drama and Trump’s Greenland comments (because apparently we’re shopping for countries now?), something quietly interesting happened in the markets. Small-cap stocks—you know, the scrappy underdogs that usually get ignored at the cool kids’ table—are absolutely crushing it.
The Russell 2000, which tracks smaller companies, is up 7% this year. Meanwhile, the S&P 500 is sitting at a modest 2%. That’s like the backup dancer suddenly outshining Beyoncé.
Why Small Caps Are Having Their Moment
Here’s the thing: globalization is having its “it’s not you, it’s me” breakup moment with America. The World Economic Forum basically confirmed what we’ve all been sensing—the era of making everything overseas and shipping it back is getting old.
The Atlanta Fed just bumped up their Q4 GDP estimate to 5.4%. That’s not just good; that’s “your portfolio might actually smile for once” good. What’s driving it? More exports, people actually spending money, and—surprise—all those AI data centers everyone’s building.
Small-cap companies tend to be more domestic-focused. While big corporations are playing global chess, these smaller companies are like “we’ll just dominate our neighborhood, thanks.” And right now, that neighborhood strategy is paying off big time.
Uncle Sam’s New Project
But here’s where it gets really interesting. The government isn’t just sitting back and watching this happen—they’re actively pushing for what some are calling a “Genesis” initiative. Think Manhattan Project meets Apollo Program, but for making America’s supply chains less dependent on that one factory in China that apparently makes everything.
This isn’t just about bringing manufacturing back (though that’s part of it). It’s about winning the AI race, securing supply chains, and basically making sure we’re not caught with our pants down if global trade gets weird again.
Historically, when the government decides to throw its weight behind domestic industries, smaller companies often benefit more than the giants. The big guys are already established; the little guys are hungry and nimble.
What This Means for Your Money
If this trend continues—and all signs point to yes—we might be looking at a fundamental shift in how markets work. The companies that seemed “too small to matter” could become the ones that matter most.
Of course, small caps are also more volatile than your friend’s dating life, so don’t go YOLO-ing your entire 401k. But if you’ve been sleeping on smaller companies because they’re not as flashy as Tesla or Apple, it might be time to wake up.
The little guys are having their main character moment. And Uncle Sam? He’s apparently writing the script.