Feature: “Terrifying Bull Bull”

How is there such a relentless bid for big-cap tech names?

Part of it is structural. Companies like Nvidia and Microsoft can make up a combined 15% of the S&P 500 thanks to their sheer size.

And week after week, 401k and other passive investment plans put more money into market indices, benefitting these already large plays.

But we’re seeing another trend at play too. Today’s investors are increasing their stakes in big companies by moving out of small companies:

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Investors aren’t just going all in on big-tech stocks, they’re selling off better-valued small caps to do so. (Source: BofA)

It’s a feature of the most terrifying bull market of our lifetimes.

Year-to-date, over $80 billion has flowed out of small-cap U.S. stock funds. These are the companies that can include the proverbial next Nvidia or next Microsoft.

Many of these companies trade at far more reasonable valuations than Microsoft and Nvidia today. And their growth rates can be just as impressive. It’s easier for a small-cap company to double earnings than a company that’s already earning tens of billions per year.

It’s likely that investors won’t rediscover these stocks until the big-cap names falter. But for all our criticism of investor enthusiasm and high-flying valuations in the overall market today, small cap stocks are starting to look like a relative value, especially for more patient investors.

The ol’ timers will tell you “small caps lead the way out” of a bust. For now, big tech continues to suck up global capital.

~ Addison

P.S.: With the Federal Reserve on track to cut interest rates at its September meeting, the stock market as a whole may get a shot in the arm – small caps and large caps alike.

Our research has found several pockets of opportunity in small-cap stocks this year, particularly in areas that can benefit from President Trump’s Great Reset of the U.S. economy.

Key areas that have already been attractive include the cryptocurrency space, resource stocks, and plays on next-generation nuclear technologies.

As always, your reader feedback is welcome: feedback@greyswanfraternity.com (We read all emails. Thanks in advance for your contribution.)

How is there such a relentless bid for big-cap tech names?

Part of it is structural. Companies like Nvidia and Microsoft can make up a combined 15% of the S&P 500 thanks to their sheer size.

And week after week, 401k and other passive investment plans put more money into market indices, benefitting these already large plays.

But we’re seeing another trend at play too. Today’s investors are increasing their stakes in big companies by moving out of small companies:

Turn Your Images On

Investors aren’t just going all in on big-tech stocks, they’re selling off better-valued small caps to do so. (Source: BofA)

It’s a feature of the most terrifying bull market of our lifetimes.

Year-to-date, over $80 billion has flowed out of small-cap U.S. stock funds. These are the companies that can include the proverbial next Nvidia or next Microsoft.

The ol’ timers will tell you “small caps lead the way out” of a bust. For now, big tech continues to suck up global capital.

~ Addison

P.S.: With the Federal Reserve on track to cut interest rates at its September meeting, the stock market as a whole may get a shot in the arm – small caps and large caps alike.

Our research has found several pockets of opportunity in small-cap stocks this year, particularly in areas that can benefit from President Trump’s Great Reset of the U.S. economy.

Key areas that have already been attractive include the cryptocurrency space, resource stocks, and plays on next-generation nuclear technologies.

As always, your reader feedback is welcome: feedback@greyswanfraternity.com (We read all emails. Thanks in advance for your contribution.)

Mining stocks amplify everything. First Majestic went from losing money to 45% margins without building anything new. They just held the line on costs while silver did the heavy lifting.

That cuts both ways. If silver drops hard, margins compress just as fast. Same leverage, opposite direction.

The miners with the lowest costs and cleanest balance sheets will hold up best in a pullback and capture the most upside if the deficit keeps grinding.

Economists at Goldman Sachs said this morning they expect core inflation to finish the year around 2% even while GDP rises at a “surprisingly strong” 2.5% clip.

In our view, their inflation forecast is optimistic. Their GDP call? Modest.

The last time we pumped this much liquidity into the system — 2020 through 2022—the result was a manic asset bubble, runaway inflation, and an epic hangover at the Fed.

Goldman’s optimism has triggered a fresh round of bullish bets: cyclical stocks are rallying, “dispersion” in the S&P 500 is spiking, and the Fed is expected to cut interest rates twice before Jerome Powell gets kicked out of Washington at the end of his term on May 15.

Anecdotally, we’re hearing stories of warehouses full of GPUs sitting unused for lack of energy to power them. It’s a natural feature of the heavy capital investment in new machines. The grid has to catch up!

While Trump’s great reset rolls on in 2026, keep an eye on modular nuclear reactors and increased demand for uranium, natural gas and related resources.

These PM producers are literally printing the most ‘hard money’ that they ever have at these metals prices and record margins here at the midway point in Q4.

If there ever was a time for this sector to get overheated and frothy, this would be it… only that isn’t what we’ve seen playing out.

PM producers are still insanely profitable at even at current metals prices and should be far more valuable based on their margins, revenue generating potential, and their resources still in the ground.