It’s a Strange Time to Be Bullish on Small Caps—That’s Why It’s Right
Nobody believes in them. That’s exactly when rotations happen.
Every bull market starts the same way: with a story.
At first, it's rooted in truth. The world is changing. A new technology emerges. Capital flows in. Valuations stretch. Leaders form.
Then it turns into religion.
In the late ’90s, it was the internet. AOL, Cisco, Pets.com. These companies were going to change the world—and to be fair, some of them did. But the market didn’t care about the fundamentals. It cared about the story.
Everyone believed it. Everyone chased it. And for a while, everyone got paid.
Until they didn’t.
When the dot-com bubble burst, the Nasdaq dropped 80%. Companies vanished. Portfolios were nuked. And traders who thought they were investing in the future were left holding worthless dreams.
But here’s what most people forget: that collapse wasn’t the end. It was the beginning of a new bull market—led not by tech, but by small caps, commodities, and international equities. That’s where the real rotation happened.
We’re seeing echoes of that setup again right now.
The Ratio Is Screaming
Look at the Nasdaq 100 vs. S&P 600 Small Cap Index ($NDX/$SML) chart.
It’s parabolic.