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Wilson Sticks To Big-Cap Bias Amid History-Making Small-Cap Rally
The dramatic rotations in US equities witnessed over the past couple of weeks are primarily a positioning shakeout and don't suggest a regime shift in favor of lower-quality names.
That's according to Morgan Stanley's Mike Wilson, whose latest weekly largely reiterated familiar talking points.
"We have long been in the camp that large-cap quality has been the place to be for equity investors as opposed to diving down the quality and cap curves," he said Monday. "That continues to be the case."
Wilson is correct that historically small cap does better early cycle and worse late cycle.
Other factors include the historic underperformance of small vs large and value vs growth, non-Mega vs Mega, and extreme concentration. The entire Russell 2000 has a market cap less than $3TR, smaller than AAPL or MSFT or on-a-good-day-NVDA. For a time, the small cap dog can be wagged by tails other than historical cyclicality.
I think the historical pattern will re-assert itself, eventually. For now, this is fun!