{"id":25205,"date":"2025-09-04T07:30:00","date_gmt":"2025-09-04T11:30:00","guid":{"rendered":"https:\/\/jeffclarktrader.com\/market-minute\/?p=25205"},"modified":"2025-09-04T09:11:19","modified_gmt":"2025-09-04T13:11:19","slug":"if-you-want-to-buy-the-dip-small-caps-may-be-your-best-bet","status":"publish","type":"post","link":"https:\/\/jeffclarktrader.com\/market-minute\/if-you-want-to-buy-the-dip-small-caps-may-be-your-best-bet\/","title":{"rendered":"If You Want to Buy the Dip, Small Caps May Be Your Best Bet"},"content":{"rendered":"
\n

Managing Editor’s Note:<\/strong> Today, we’re hearing from our contributing editor Mike Burnick in his weekly Thursday feature.<\/p>\n

 Mike has over 30 years in the investment and financial services industry – from operating as a stockbroker, trader, and research analyst, to running a mutual fund as a registered investment advisor and portfolio manager, to being Research Director for the Sovereign Society, specializing in global ETF and options investing.<\/p>\n

 And he’s been senior analyst at TradeSmith for three years, running Constant Cash Flow, Infinite Income Loop, <\/em>and Inside TradeSmith<\/em>.<\/p>\n

 Here’s Mike…<\/p>\n<\/div>\n

If You Want to Buy the Dip, Small Caps May Be Your Best Bet<\/h2>\n

BY MIKE BURNICK, CONTRIBUTING EDITOR, MARKET MINUTE<\/em><\/strong><\/p>\n

August was another month of upside rip for stocks with the S&P 500 up 2.05% to new record highs. But the month ended, and September began with a dip.<\/p>\n

In fact, the S&P lost all of last month’s gains in just the two trading days around Labor Day weekend.<\/p>\n

That’s not surprising since September does have an ugly reputation for stock investors. The S&P 500 Index has been down 44% of the time during September since 1928 while posting an average loss of 1.1%.<\/p>\n

But it’s too soon to say for certain if the Labor Day dip is just the start of a deeper pullback, or if it is just another wobble in an overbought market that is soon followed by new highs.<\/p>\n

Only time will tell.<\/p>\n

But if you are looking for buy-the-dip opportunities, and assuming we finally get a decent one this month, small-cap stocks may be the best place to prospect, for two reasons.<\/p>\n\n

\"\"<\/figure>\n\n

First, small caps in the Russell 2000 Index (IWM) are (finally) outperforming the big-cap S&P 500 Index (SPX), as you can see above (top panel).<\/p>\n

Since August 11, in fact IWM (+14.6%) has outperformed SPX (+8.8%) by a pretty wide margin of nearly 6%. This outperformance appears to be driven by speculators scrambling to cover their massive, short positions in IWM, as you can see in the lower panel of the chart.<\/p>\n

In fact, the net short position in Russell 2000 futures placed by big institutions\/hedge funds was recently was one of the largest crowded short positions of the last decade. And unwinding a large short such as this can take time, driving asset prices much higher in the process.<\/p>\n

Second, another, more fundamental factor is at work to support a small-cap stock rally: Stronger profit growth.<\/p>\n

Profit results beat Wall Street estimates by a wide margin last quarter and investors cheered when S&P 500 earnings jumped 13.2% year over year.<\/p>\n\n

\"\"<\/figure>\n\n

But the fact is, Russell 2000 earnings soared 69.4% (that’s not a misprint<\/em>) year over year at last count, also exceeding expectations by an even larger margin, as you can see above.<\/p>\n

Plus, take a closer look at analyst estimates for the rest of this year and for 2026… they’re penciling in 40%+ growth<\/u><\/em> through the end of 2026.<\/p>\n

Profits for the S&P 500 by comparison are forecast to grow just 10.5% this year and 13.4% next year.<\/p>\n

Bottom line<\/em><\/strong>: If you’re licking your chops for a buy-the-dip opportunity now that September is here, take a closer look at buying dips in small-cap Russell 2000 stocks. You’ll be prospecting in a much more fertile field of earnings growth which could finally make small caps the best bet to catch up and surpass the S&P 500.<\/p>\n

Good investing,<\/p>\n

\"Signature\"<\/p>\n

Mike Burnick
\nContributing Editor, Market Minute<\/em><\/p>\n\n\n\n","protected":false},"excerpt":{"rendered":"

Take a closer look at buying dips in small-cap Russell 2000 stocks.<\/p>\n","protected":false},"author":100,"featured_media":0,"comment_status":"closed","ping_status":"0","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"ep_exclude_from_search":false,"service":"","footnotes":""},"categories":[1],"tags":[],"publication":[],"person":[155],"newsletter-type":[],"ticker":[],"class_list":["post-25205","post","type-post","status-publish","format-standard","hentry","category-market-minute","person-mike-burnick"],"acf":[],"_links":{"self":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/25205","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/users\/100"}],"replies":[{"embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/comments?post=25205"}],"version-history":[{"count":1,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/25205\/revisions"}],"predecessor-version":[{"id":25211,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/25205\/revisions\/25211"}],"wp:attachment":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/media?parent=25205"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/categories?post=25205"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/tags?post=25205"},{"taxonomy":"publication","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/publication?post=25205"},{"taxonomy":"person","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/person?post=25205"},{"taxonomy":"newsletter-type","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/newsletter-type?post=25205"},{"taxonomy":"ticker","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/ticker?post=25205"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}