Bank of America Predicts End of Large-Cap Equity Dominance, Beginning of Small-Cap Surge – Here’s When: Report

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Ah, the majestic Bank of America, that paragon of financial wisdom, has whispered a prophecy to the masses: large-cap stock dominance, like all fleeting things, may soon fade into the annals of history. What might rise in its place, you ask? Small-cap gains, of course-so long as the U.S. Federal Reserve decides to play the benevolent overlord and cuts interest rates. But surely, it’s not that simple. We must look to the divine musings of Savita Subramanian, the high priestess of US equity and quantitative strategy, to see where the winds are blowing.

In a communiqué so grand it could almost be mistaken for an oracle’s proclamation, Subramanian states that the market may once again channel the spirit of the early 2000s, that glorious era when the great dot-com bubble burst and left in its wake the ascendance of small-cap and value stocks. The echo of this could very well rise again, should the Fed choose to loosen its purse strings.

“History, as always, likes to make a grand entrance and suggests that the cap-weighted dominance may still have more to give. But-ah, there’s always a but! If the Fed decides to cut rates, and if the Regime indicator points to a Recovery, we might just be nearing the end of this particular run…”

“When the Fed eases, you know the story: mega-caps, those overfed beasts, tend to lag behind the pack. As inflation dances its fiery tango, there’s a chance that the S&P 500 might spread its wings and soar beyond the usual suspects of defensive stocks and secular growth.”

But let us not forget the staggering fact that the largest 50 stocks in the S&P 500 have outperformed the benchmark index by a truly remarkable 73 percentage points over the last decade. A true testament to the power of the large-cap giants.

And as for the CME FedWatch Tool? It now offers an 83.1% chance that the Fed will cut the federal target rate by a modest 25 basis points at the September Federal Open Market Committee meeting. A probability that even the most cynical market observer might nod along to.

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2025-08-20 18:35