Small- and large-cap stocks are like politicians.
People vote a certain party into power because theyre unhappy with what the other is doing.
The power goes to the heads of the winners, and they make the voters mad. So, they vote the other party back into power.
Its a reversion to the mean.
With stocks, large and small caps flip-flop, too.
Read on to learn how that can make you money
Small Caps Tend to Outperform
Large caps have been outperforming. After a while, though, this gets old.
Well, mathematically, when you outperform for a period of time, it becomes harder to maintain that level of relative returns.
So, large caps outperform for a some time until their valuations get too high.
However, unlike the presidency
Since the beginning of 1979, small-cap stocks have outperformed large caps by more than 1,700%!
20 Largest Companies In The USA
Small caps have outperformed large caps in 23 of 42 years:
(Source: fred.stlouisfed.org, internal calculations)
And thats in spite of the recent run large caps have been on.
As you can see, large caps are moving in an unprecedented fashion.
They have outperformed small caps in six of the past seven years. (That includes this year.)
Theyve never done that before.
The best stretch of outperformance large caps ever had was five years in the 90s. And five of seven years starting in 1984.
The fact that large caps have outperformed small caps in the recent past means a couple of things.
First, you would have made more money owning the S&P 500 Index than the Russell 2000 Index over this period.
small caps are about to take over.
This Forecast Makes Practical Sense
When you think about it, this is how it should be.
The largest companies arent the biggest innovators. The smallest companies are.
The smallest companies form the ideas that become progress.
They start from garages and dorm rooms. Their leaders drop out of college and forget to shower.
Small caps make the U.S. great.
They become the next Google
the next Apple
the next Microsoft.
If you are a long-term investor, you need to hold some small caps because they can rise by thousands of percent. Their larger peers rise hundreds of percent in a good decade.
How to Tap Into the Most Powerful Income Stream in America... [sponsor]
Each month, Americas most powerful investment is set to pay out around $4.7 billion on average. According to Kiplinger, it can provide a steady stream of retirement income that will last a lifetime. If youd like to see what all the fuss is about
and snag your share of the $4.7 billion payout as soon as next month click here for the full story.