NEW YORK (TheStreet) -- The Great Rotation won't be from stocks to bonds, say investors on StockTwits.com. It will be from small and mid-cap stocks to established, multi-billion companies. And the trading action so far this week supports their view.
The iShares Russell 2000 (IWM), an ETF of companies with market caps under $2 billion, is down about 3% in the past five days. It fell an additional 1.4% intraday. Meanwhile, the Dow Jones Industrial Average (DIA) is up about 0.8% over the same time period.
The Nasdaq has fared much worse than the Dow. It is down more than 2% in the past five days. But much of the losses have come from younger, smaller companies. Hundred-Billion tech giants such as IBM (IBM) Cisco (CSCO) Apple (AAPL) Microsoft (MSFT) have fared relatively well, posting gains of more than a percent each over the same time period. Investors say the reason for the rotation is valuation.
Though investors are still willing to bet on stocks and global economic growth, they fear the valuations of small cap names with relatively little or no profits have become outsized due over-excitement around the potential of new technologies, mobile apps, and medications. Perhaps the greatest evidence of this new concern is the double-digit drop in King Digital Entertainment KING shares on the first day of trading.