Small-Caps Continue to Shine

"Big is better" is the mind-set of a growing number of market participants and prognosticators. In the wake of evidence of a slowing economy, Fed tightening, geopolitical concerns and corporate profit warnings, the conventional wisdom on Wall Street is that it's time to move money out of smaller, flashier stocks and into safer, more liquid names, i.e., big-caps.

Such a migration seems logical, but it bucks longstanding market trends and has plenty of skeptics.

Thomas McManus, an equity portfolio strategist at Banc of America Securities, was among the many strategists to recommend "higher-quality" companies at the start of 2004. "So far, this trade has been a disappointment, as smaller companies ... have outperformed significantly," McManus conceded this week. ...