Looking at the raw numbers, the S&P 500 index was lower last week, but if you look at the same index with equally weighted components, which are not weighted by market cap, The S&P rose 0.78%, so the average stock in the S&P 500 index (equally weighted) rose while the index itself was marginally down.because we saw the same trends in the first week of 2026 that continued last week.
The gap between the S&P 500 Equal Weight Index and the S&P 500 has been huge over the past two weeks. I’m not sure if this rotation will continue at the same rate, but it’s likely to be in fits and starts throughout the year.. While value and small caps may improve the technology sector, I don’t believe it is possible for the technology sector to go lower while value and small caps go higher.
The technology sector can only mean one thing – the entire market goes downjust because of the technology sector’s heavy weighting in the stock market, the largest ever, pushes 40%, if you classify some of the big technology stocks differently (like electric cars).
A more extreme version of this rotation is represented by the Russell 2000 Index, the first index one thinks of when discussing small caps. Russell had another solid week (2.1%). The index is set to have a good year, with the rapid GDP growth likely to be boosted by the Trump administration. If we get a seemingly counterintuitive environment of high and low interest rates, I wouldn’t be surprised to see the Russell 2000 rise 50% in 2026.. The index has seen a massive multi-year outperformance before, and the environment is once again ripe for such a move.
The entire index has more than $3 trillion in market cap — a rounding error when it comes to the economy. That’s smaller than many of the individual megacaps in the Magnificent 7, and when it comes to stock picking, it’s a troublesome index. A small-cap stock with great but under-followed fundamentals can be flat for literally six months and then make an explosive move, and vice versa. Small-cap portfolios are notoriously less correlated to small-cap indices than large-cap portfolios. If you want to play the small-cap market, you might be better off with index funds and broad ETFs, I think, on indexes.