Is It Time for Small Caps to Shine?

The S&P 500 (SPY) bounced an impressive +8.92% in November. And now stocks are pressing up against the highs of the year looking ready for more.

At this stage the pace of gains will slow. Probably more of a melt up scenario for stocks given the bullish bias of the holiday season.

Meaning this is the stage that investors will be more discerning about what they buy instead of everything bouncing from bottom. And that is the stage that favors quality and value...the exact kinds of stocks we place in our portfolio.

Market Commentary

As noted in my article from earlier in the week, we have a bull market til proven otherwise. The only thing to be on guard about is signs of economic weakness that increase the odds of recession.

Gladly right now things are looking pretty solid on that front with a +2.1% GDP estimate from the coveted GDPNow. Helping to potentially improve that picture is that Chicago PMI (focused on manufacturing) came in Thursday at a surprisingly strong 55.8 versus an abysmal 44.0 last month.

Chicago PMI is not typically a market moving event. But insiders know that it is the best leading indicator of what shows up in the vital national report, ISM Manufacturing which comes out Friday morning. This bodes well for an improvement in this sector that is beneficial to the overall economy.

Looking ahead investors should be watchful for these other key reports:

12/5 ISM Services- this has been the healthier part of the economy leading to solid GDP readings of the past. In general, when employment is solid, and consumers have money in their wallets...they will spend it pushing our economy forward.

12/8 Government Employment Situation- Monthly jobs adds have been easing, and more importantly, wage inflation has slowed. Keeping on that track is a goldilocks reading for this economic report.

12/12 CPI & 12/13 PPI- These key inflation reports have been trending nicely lower for several months which is a big part of the bull market returning in 2023. The better this looks...the sooner the Fed considers lowering rates in 2024...the faster the economy will grow...the higher stock prices will go.

The other important aspect noted in my last article, was that it was high time for this rally to broaden out to more stocks...not just the mega caps that dominate the S&P 500.

Gladly that seems to be happening more and more of late including the +0.61% showing for the Russell 2000 Wednesday while the S&P 500 was actually in the red. Even more impressive was the 5X better results for small caps on Friday as investors seem to be taking profits on over-inflated large caps.

That’s a good trend given that historically bull markets are led by small caps. And yet it’s been 4 years since small caps were leading the parade over their larger peers. I highly anticipate that small caps will regain the performance thrown in 2024 and believe that investors should overweight them in their portfolio going forward.

The key is WHICH small caps?

More on that subject in the next section...

What To Do Next?

Discover my current portfolio of 7 stocks packed to the brim with the outperforming benefits found in our POWR Ratings model.

Yes, the same model that has beaten the market by more than 4X since 1999. And yes, we have a number of small caps on board to take advantage of the groups likely future success.

Plus I have added 4 ETFs that are all in sectors well positioned to outpace the market in the weeks and months ahead.

This is all based on my 43 years of investing experience seeing bull markets...bear markets...and everything between.

If you are curious to learn more, and want to see these 11 hand selected trades, then please click the link below to get started now.

Steve Reitmeister’s Trading Plan & Top Picks >

Wishing you a world of investment success!

Steve Reitmeister…but everyone calls me Reity (pronounced “Righty”)
CEO, StockNews.com and Editor, Reitmeister Total Return

SPY shares were trading at $458.69 per share on Friday afternoon, up $2.29 (+0.50%). Year-to-date, SPY has gained 21.27%, versus a % rise in the benchmark S&P 500 index during the same period.

Steve is better known to the StockNews audience as “Reity”. Not only is he the CEO of the firm, but he also shares his 40 years of investment experience in the Reitmeister Total Return portfolio. Learn more about Reity’s background, along with links to his most recent articles and stock picks.

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