In August of 2020, amid a late-summer melt-up in high-flying US tech stocks (remember “The Nasdaq Whale” saga?) the ratio of the Russell 2000 to the Nasdaq 100 matched the dot-com bubble lows.

Thereafter, amid re-opening optimism tied to the approval of COVID vaccines and two more rounds of stimulus payments, small-caps recovered some ground versus big-tech. The reversal was short-lived. Small-caps’ fleeting bout of outperformance peaked just as Joe Biden’s American Rescue Plan was signed into law.

The Russell’s relative performance struggles then resumed, but the situation remained a semblance of stable for the ensuing two years. Then, in February of 2023, the bottom fell out anew as the onset of the AI race rekindled a frenzy in big-tech.

The figure above gives you a sense of the extent to which small-caps, on a relative performance basis, have been a one-way ticket in the wrong direction for two decades. They outperformed dramatically for three straight years during the tech bust, then held their own in 2003, 2004, 2005 and 2006. Since then, they managed to best big-tech just five times.

So far in 2026, the Russell 2000’s beating the Nasdaq 100, and not by a small margin: Some 8ppt. Despite — and in a sense because of — the AI race, some believe the outlook for small-caps versus big-tech is bright this year, as candles in the sun go.

As discussed here, the AI story’s becoming a headwind for big-caps, or at least it’s starting to cannibalize itself within tech, where software’s an early “disruption” casualty. That dynamic’s even visible within individual stocks — Microsoft’s a software incumbent and it’s also an AI leader.

Between that push-pull, mega-cap cash burn (and the leveraging of what used to be the world’s best balance sheets to preserve buybacks amid that burn) and concerns over the temporal gap between enormous AI capex and ROI on those outlays (a disparity exemplified by the juxtaposition between hyper-scaler capex growing 75% versus mega-cap cloud revenue “just” 25-45%), the outlook for big-tech’s decidedly indeterminate (pardon the oxymoron).

Meanwhile, small-caps are seen by some as benefiting from Donald Trump’s mid-term year push to address America’s affordability crisis, an effort which began late last year and continues to manifest in heavy-handed policy proposals like this week’s trial balloon regarding a possible anti-trust probe into homebuilders.

The figure above plots the Russell 2000 (the “base”) against an equal-weighted “index” of Nvidia, Meta, Palantir, Tesla, Cathie Wood, Apollo, Blackstone, Oracle, Coinbase and Bitcoin. BofA’s Michael Hartnett calls that group the “Bro Billionaires.”

It’s important not to gloss over the fact that there are more Trump friends among the “Bro Billionaires” than there are among the “base.” Indeed, I’d argue “base” is a misnomer when applied to small-caps as a proxy for Main Street.

I mean, for goodness sakes: The “Bro Billionaires” category includes Elon Musk, Mark Zuckerberg, Larry Ellison and Steve Schwarzman. Three of those four are, or were at one time, card-carrying MAGA cheerleaders and the other’s a Trump booster.

Unwilling as some of Wall Street’s contrarian-minded strategists are to concede this, Trump’s “base” is, was and always will be, “bro billionaires.” He’s one himself. Trump’s populism, like most populism, is false. He’s an opportunistic demagogue.

With that latter point in mind, don’t be too surprised if the implication from the second chart above — namely that the “base” will continue to outperform the “Bro Billionaires” into the mid-terms as it has since Trump’s late-2025 pivot to affordability, doesn’t pan out.

For now, though, I suppose the prospect of Main Street winning is worth entertaining. “We are long Main Street and short Wall Street until Trump’s approval rating [improves] on a policy pivot to address affordability,” BofA’s Hartnett said.

“I was told there’d be cake.”