Transport stocks? Snore. Small caps? Double-snore. That’s been the typical reaction when you mentioned those groups in this all-tech, all-AI, all-the-time stock market. But that may be starting to change!
Just look at these two MoneyShow Charts of the Day. The first shows the iShares Transportation Average ETF (IYT), while the second shows the iShares Russell 2000 ETF (IWM). Both ETFs are really on the move!
iShares Transportation Average ETF (IYT)
Source: StockCharts
iShares Russell 2000 ETF (IWM)
Source: StockCharts
What I’m not showing…but you might be able to infer from my opening comments...is that technology stocks are lagging a bit. In the last month, IYT is up 5.4% and IWM is up 4.4%. The State Street Technology Select Sector SPDR ETF (XLK) is DOWN around 1%.
I try not to overreact to short-term moves. And yes, a one-month change in leadership definitely qualifies as “short term.” But the gradual rotation of money out of tech and into other sectors makes sense, considering questions are being raised about the AI boom.
Plus, the Federal Reserve is expected to cut interest rates again at its Dec. 9-10 meeting. All else being equal, Fed cuts bolster small caps because they tend to be more highly leveraged – and therefore benefit disproportionately from lower borrowing costs.
Several speakers at our MoneyShow Masters Symposium Sarasota last week talked about the potential for rotational action in 2026. They recommended investors add exposure to other sectors rather than stay too overloaded in tech.
It’s early. But the market may be saying that YES, it’s time to do exactly that!
