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華爾街日報Santa Swaps Magnificent 7 For Russell 2000: Year-End Gift Investors Waited For
Investors unwrapping their portfolios this holiday season are finding a welcome surprise: a decisive market rotation that is finally favoring the underdogs of Wall Street.
After years of being overshadowed by the Magnificent 7 giants, small-cap stocks are surging into the year-end, delivering the breadth of participation that market watchers have long awaited.
Small-Cap Breakout
According to a new technical strategy report from BTIG, the “Endless Dove,” market environment has triggered a significant shift in capital.
While the tech-heavy giants have dominated headlines for much of the year, investors are now aggressively pivoting toward the areas of the market most sensitive to lower interest rates—specifically, small-cap equities.
The clearest sign of this rotation is the performance of the ETF tracking the S&P SmallCap 600 Index— State Street SPDR Portfolio S&P 600 Small Cap ETF (NYSE:SPSM).
Analysts note that the index is “finally within spitting distance of new all-time highs,” poised to join the iShares Russell 2000 ETF (NYSE:IWM), tracking the Russell 2000, which has already broken out to new peaks.
This synchronized strength suggests that the rally is broadening out beyond the mega-cap tech names that drove returns earlier in the cycle.
See Also: 3 Great Retail Stocks For the Holiday Season
Breaking The Trend
Perhaps the most critical technical development is the relationship between the small-cap cohorts and their massive technology counterparts.
The report highlights that the ratio of the S&P 600 versus the Mag 7 is currently attempting to break a “multi-year downtrend.”
This potential reversal is flagged as a key theme to watch closely heading into 2026, signaling that the era of concentrated tech leadership may be giving way to a more diversified market leadership.
Dovish Winds Fuel The Rally
The catalyst for this ‘Santa Swap’ appears to be a favorable macroeconomic backdrop. Despite initial fears of a “hawkish cut,” recent market reactions have been “clearly more dovish than anticipated.”
As a result, investors have doubled down on the rotation trade, pressing into sectors that benefit most from a stabilizing rate environment.
Tech Takes A Breather
As small caps surge, the previously unstoppable tech sector is showing signs of fatigue. The report notes that the tech sector looked set to end a winning streak, weighed down in part by results from Oracle Corp. (NYSE:ORCL).
However, this rotation is viewed as healthy for the broader market. Analysts emphasize that as long as these rotations persist, a “broad-based index pullback is going to be difficult to come by,” especially with the VIX volatility index nearing its lowest close since September.
Looking Ahead To 2026
With the “SPSM vs. Mag7” ratio testing critical levels, the stage is set for a dynamic start to 2026. If the breakout holds, the “year-end gift” of a small-cap rally could evolve into the dominant market narrative of the new year.
As of the publication of this article, the S&P SmallCap 600 Index was up 6.70% year-to-date, whereas the SPSM ETF tracking it rose 6.55%. Additionally, the Russell 2000 Index was up 13.87%, and IWM was 13.99% higher in the same period.
Here is how the Mag 7 stocks and the ETF tracking them have performed.
| Stocks | YTD Performance | One Year Performance |
| Nvidia Corp. (NASDAQ:NVDA) | 36.80% | 34.94% |
| Apple Inc. (NASDAQ:AAPL) | 11.69% | 5.48% |
| Microsoft Corp. (NASDAQ:MSFT) | 16.31% | 10.82% |
| Amazon.com Inc. (NASDAQ:AMZN) | 5.41% | 1.35% |
| Alphabet Inc. Class A (NASDAQ:GOOGL) | 65.95% | 60.29% |
| Alphabet Inc. Class C (NASDAQ:GOOG) | 65.60% | 59.78% |
| Meta Platforms Inc. (NASDAQ:META) | 10.96% | 9.41% |
| Tesla Inc. (NASDAQ:TSLA) | 28.02% | 5.04% |
| Roundhill Magnificent Seven ETF (BATS:MAGS) | 25.79% | 17.30% |
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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