Investors are closing out 2025 by dumping the biggest winners and buying up everything they’ve been ignoring. Tech giants that powered this year’s 17% jump in the S&P 500 are now taking a back seat, while small-caps, mid-caps, transport stocks, and other lagging corners of the market are suddenly outperforming.
What’s normally a clean-up season for portfolios has turned into a full-scale rotation into beaten-up stocks.
Since November 20, when US equities bottomed near-term, the Russell 2000 Index has jumped 9.4%, punching through a fresh all-time high on Thursday.
Micro-cap names have surged 12%, and a key mix of airlines, shipping, and trucking stocks has risen 11%, gaining every single trading day in that span. The S&P 500, weighed down by slowing tech names, moved up 5.1% by comparison.
The reason behind the pivot is clear. The AI trade that sent tech stocks soaring earlier this year is losing steam. Nvidia and Microsoft, which had driven most of the gains, are no longer climbing.
Traders are now betting that the US economy will gain speed in early 2026, so they’re shifting into cheaper, value stock names tied to real economic activity.
Strategas, BofA push clients toward value plays
Jason De Sena Trennert, co-founder of Strategas Asset Management, has been telling clients to buy the equal-weighted S&P 500, which spreads weight more evenly across all 500 stocks rather than concentrating it in mega-caps.
Jason said the White House under President Donald Trump is expected to push forward a tax package that would lift consumer demand and capital investment. He also pointed to the upcoming World Cup, which he said could help drive broader economic and corporate growth next year.
Jason’s view was echoed by Michael Hartnett, chief investment strategist at Bank of America, who told clients Friday to lean into cheap mid-cap stocks with strong exposure to the economic cycle.
Michael argued the Trump administration would likely act to keep inflation and unemployment under control, which would support sectors like retailers, real estate investment trusts, homebuilders, and transportation firms. He made clear the upside now rests outside the tech names.
That shift already showed up clearly in November’s performance breakdown. The equal-weight S&P 500 climbed 1.7%, beating the cap-weighted version’s 0.3% gain.
The top 50 stocks in the S&P dropped 0.6%, while the other 450 names rose 1.3%, based on BofA’s latest breakdown. It was a decisive break from the narrow leadership that defined most of the year.
JPMorgan warns profit-taking could pause rally
Not every firm is betting this rotation will continue straight through December. A team of strategists at JPMorgan, led by Mislav Matejka, flagged the risk that traders may start taking profits right after the Federal Reserve’s expected rate cut this Wednesday.
Right now, there’s a 92% chance priced in that the Fed will move to lower borrowing costs, after a series of positive policy signals over the last few weeks.
“Investors might be tempted to lock in the gains into year end, rather than be adding directional exposure,” Mislav wrote in a note. “The cut is now fully in the price, and equities are back to highs.”
Still, the JPMorgan team remained upbeat on the medium-term picture. They said a dovish Fed, low oil prices, falling wage growth, and easing tariff tensions will give the central bank plenty of room to act without triggering inflation. They see that backdrop supporting further equity gains, just not necessarily this month.
Beneath the surface, health care led all sectors in November with a 9.1% gain, while information technology fell 4.4%, making it the worst performer. Communication services and materials also moved higher. Value outpaced growth and every other factor last month, reversing a long underperformance stretch.
Momentum stocks, which had been the big gainers earlier in the year, stumbled hard. Savita Subramanian, head of equity and quantitative strategy at BofA, said this may show a “change in leadership, as established outperformers give way to former laggards.”
The push into underloved names isn’t slowing. Scott Rubner of Citadel Securities told clients Friday that these rotations are still active, with the Russell 2000 beating the S&P 500 and Nasdaq 100 on several days. He said it’s a sign traders are moving beyond just chasing Big Tech.
The rotation kicked off after disappointing AI-related earnings from major tech firms last month, which raised red flags about future AI spending.
That gave traders a reason to step back from high-priced growth stories and finally give room to the stock names that had lagged all year. Now those forgotten names are the ones pushing the market higher.
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