The S&P 500 and Nasdaq 100 indexes are currently at all-time highs, while the smaller S&P 600 and S&P 400 indexes have shown little progress since late 2021. These smaller indexes have been stagnant, not reaching new cycle highs since March.
According to Oppenheimer researchers, large caps may continue to lead the market for the time being. The firm has set its year-end S&P 500 target as the second-highest on Wall Street and still prefers larger stocks over mid caps, which it in turn favors over smaller companies.
Despite their lack of breakout, SMID caps (small and midsize stocks) have been quietly gaining momentum throughout the year. Oppenheimer noted that these stocks are in a clear long-term uptrend from a technical standpoint, indicating a potential breakthrough in the near future.
The researchers wrote, “Each of these unconfirmed averages are maintaining above prior breakout levels and their 200-day average, leading us to favor a bullish resolution from their year-to-date range.”
Within the SMID caps category, Oppenheimer is particularly bullish on midsize growth stocks. While mega-cap stocks have been popular recently, the firm believes that the less-flashy mid-cap stocks will take the lead in the next phase of the market rally, possibly in the next few months.
“Mid-cap growth remains our top rotation idea,” the Oppenheimer researchers concluded.