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Bubbles, bubbles, bubbles. It’s probably the word I’m hearing thrown around the most in trading circles right now. If anything, there’s a bubble in people calling markets a bubble.

Are there areas of the market where bubbles exist? Absolutely. I get the obsession over the indices, AI, and the Mag 7 -- this is where many of the returns have been in recent months. But the truth is, there are plenty of assets and even sectors around the world that are not in a bubble, and that includes right here in the United States, too.

I want to take some time to share one segment of the market that is absolutely not in a bubble, and it is shaping up to be home to one of the biggest opportunities in 2026. 

The Big Opportunity in Small-Caps

Check out this monthly chart of the Russell 2000.
 

(Click on image to enlarge)

Let’s start with the basics. There is a clear uptrend here. Higher-highs and higher-lows. Bulls are favored here simply from this alone.

But look how October’s highs are barely above the highs from 2024, and more importantly, 2021. Are we really going to sit here and claim everything is a bubble when we have a U.S.-based index literally a few percentage points above its highs from four years ago?

Think about everything that has happened since 2021 -- there was a bear market, a recession, presidential elections, and more. If anything, I’m looking for a massive rotation into small-caps for 2026. 

In fact, I would argue that if the Russell doesn’t assume some type of leadership in 2026, that would be an even bigger problem. Since there are a million reasons to be concerned about markets right now, I’m going to take the other side and say that small-caps are likely home to the best opportunity in the U.S. right now. I’ll keep you posted.

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