If you’ve been laser-focused on the S&P 500 or the Magnificent Seven this year, I get it. 

That’s where most of the big headlines and momentum have been happening.

But while everyone’s been chasing Nvidia and Apple, something quiet — almost sneaky — has been happening with small caps. 

They’re starting to move.

I’m talking about the Russell 2000, which has been the market’s problem child for most of 2025. It’s been lagging and full of chop, trapped in a range while the big names run laps around it.

But over the past few weeks, small caps have been catching a real bid. 

We’re seeing accumulation and rotation. And even better, we’re seeing attention start to shift.

That’s not something you want to ignore, because when small caps start to move, they don’t tiptoe higher. 

They run.

Let’s take a look at this. 

Value-Added Development

Small caps tend to get crushed in high-rate environments because they’re more sensitive to borrowing costs. They don’t have the cash cushions or easy credit access of the mega caps.

So when interest rates stay elevated, small caps really feel it, and that’s exactly what we’ve seen all year. The Fed’s “higher for longer” stance kept pressure on these names. 

On top of that, recession fears spooked investors out of riskier corners of the market, and small caps got left behind.

But that narrative is starting to crack. 

Rate cut hopes are back on the table, while inflation has cooled off just enough. The Fed’s tone has softened, even if they’re still being cautious. 

And recession talk is getting quieter by the day.

Suddenly, small caps don’t look so risky. In fact, they’re starting to look like value.

A New Beginning

Here’s what matters from a trading perspective: The Russell has spent most of this year locked in a sideways chop, with plenty of failed breakouts and ugly reversals. Basically, a chart that’s beat up bulls and bears alike. 

But something changed in October. The range got tested and held. Buyers showed up right where they needed to. Then came the bid and the volume.

That’s positioning. It means money is moving.

If this turns into a real rotation, you don’t want to be the last one to notice.

Small caps don’t just represent a few speculative stocks, they represent risk appetite and are a proxy for how aggressive institutions are willing to be.

So when the Russells perk up, it often signals that money is shifting out of “safe” trades and into names that can deliver growth in a more favorable macro environment.

It’s the kind of rotation that can mark the start of something, not the end.

Stay on This

Now, I’m not saying you should do anything drastic here. You know me better than that.

But this is something I’m watching very closely.

I’ve been doing this long enough to know that major rotations rarely ring a bell at the top or the bottom. They happen quietly and slowly, while everyone’s looking somewhere else.

And if small caps start to lead and this bid holds, you’ll want to have a game plan.

There are trades to set up and option spreads to structure, sector ETFs to consider. And some individual names inside the Russell that could seriously move if the trend sticks.

The smart money’s not chasing headlines.

It’s sniffing around in places most people stopped paying attention to months ago.

Don’t be late.

Stay street smart,
Jeff Zananiri