Oppenheimer views last week’s rally in small cap stock as a potential catalyst for the wider market and its future returns. “While small-cap returns have been marginally higher following this signal, the S & P 500 currently exhibits a stronger relative trend and a higher weighting toward this cycle’s leadership,” said chief market technician Ari Wald in a note to clients on Saturday. “The point is that last week’s small-cap breakout marks a re-broadening of the bull that should carry bullish implications for all capitalizations.” Wald added that weekly small-cap rallies exceeding 5% since 1979 have culminated in above-average returns for the S & P 500 and Russell 2000 over the course of the following one-, three-, six- and 12-month periods. .RUT YTD mountain Performance in 2024 The comments from Wald came on the heels of last week’s 6% surge in the Russell 2000 index of small caps. The iShares Russell 2000 ETF added as much as another 1.6% early in Monday’s session. Many on Wall Street have come to view the small-cap trade as a potential winning strategy this year. The sector tends to perform well during presidential election cycles. Given their higher sensitivity to interest rates, small caps should also benefit from lower borrowing costs when the Federal Reserve eventually begins cutting rates . The index is up 7.4% this year through Monday morning. Given this outlook, Oppenheimer reiterated some of its top small- and mid-cap stock picks that could benefit from secular trends, including the rise of artificial intelligence and obesity drugs. The picks included Viking Therapeutics and marketing technology provider Zeta Global . “In our view, this cycle’s ‘as good as it gets moment’ has not yet been reached,” Wald said.
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