Are small cap stocks about to have their moment? It seems that may be the case... Considering large caps, as measured by the S&P 500, have done the heavy lifting of the current stock market rally. And the Magnificent Seven - a group of seven megacap technology growth stocks associated with artificial intelligence - have led the way. Because the S&P 500 is a weighted index, companies with the largest market caps have a bigger impact on it. And all of the Magnificent Seven stocks are among the 11 largest firms in the world. But the Magnificent Seven's recent run - as a group they're up 230% since October 2022, the beginning of the current bull market - has also made them very expensive. The forward price-to-earnings ratio (p/e) of the Magnificent Seven now stands at 28.6. That's far higher than the S&P 500 p/e (22.2) and nearly double that of the S&P Small Cap 600 Index (just 15.6). And now, several challenges that have held small cap companies back are receding. So there are suddenly new opportunities in the small cap space. |
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