Big Tech, move aside… small but mighty companies are gaining traction. If you’re a loyal Peak Money reader (we see you), you probably know that the world’s biggest tech companies — known as the Magnificent Seven — have dominated the stock markets this year, while smaller companies have fallen behind. That’s now changing. Since the beginning of the month, the Russell 2000 Index, which tracks 2,000 smaller U.S. companies, has shot up by about 8%. Meanwhile, Magnificent Seven stocks, which make up a whopping 29% of the S&P 500’s performance, has dipped about 4.6% since the beginning of July. Investors aren’t sure why this reversal is happening, but analysts say the increased likelihood of rate cuts in the U.S. would likely benefit smaller companies because they tend to carry more relative debt than bigger firms. While rate cuts would also be helpful for big companies, they're used to thriving with high interest because they've got mountains of cash on hand. According to Goldman Sachs's chief U.S. equity strategist, David Kostin, this flip in the market is likely to stick around unless there are big changes in the U.S. economy, like tech giants reporting amazing earnings that force analysts to raise their expectations for the rest of the year. But things aren't looking too hot for the Magnificent Seven for now. Tesla and Google just reported disappointing earnings this week, and that's only added to the S&P 500’s downturn.
