Name: Small Caps Are Back | Animal Spirits 448
Uploaded: 2026-01-21T14:00:10+00:00
Duration: 3878 s

Speakers

Michael Batnick — Managing Partner, Ritholtz Wealth Management

Ben Carlson — Director of Institutional Asset Management, Ritholtz Wealth Management

Summary

Animal Spirits hosts Michael Batnick and Ben Carlson discuss geopolitical risk from Greenland/tariffs, rising bond yields, and a broadening stock market. They highlight small-cap outperformance and rotation away from mega-cap tech, while also covering consumer balance sheets, housing and multifamily real estate stress, AI, crypto/tokenization, and media. The main market implication is a constructive but volatile backdrop, with geopolitical shocks seen as less damaging than an earnings downturn.

Geopolitical tensions over Greenland and tariffs are driving volatility, gold/silver strength, and bond-yield worries.
Small caps and the Russell 2000 are breaking out after years of underperformance, with Mag 7 relative weakness.
Consumer household balance sheets look strong, though the evidence is more macro than directly investable.
Housing may benefit from mortgage-rate normalization, while multifamily real estate faces delinquency stress.
AI, crypto/tokenization, and NYSE 24/7 trading were discussed without a clear investable call.
The hosts see geopolitical volatility as preferable to an earnings-led downturn and expect selloffs to be quick if earnings hold.

Ideas

Michael Batnick Managing Partner, Ritholtz Wealth Management 5:43

Long-term bullish on the US.

He remains wildly bullish on the US over the long term because it has built-in advantages and a privileged global position, while cautioning that the country should not abuse that power or assume permanent market leadership.

Michael Batnick Managing Partner, Ritholtz Wealth Management 10:57

Gold/silver hedge geopolitical risk, Bitcoin doesn't.

During geopolitical upheaval, gold and silver are the assets reacting while the dollar and Bitcoin are not; Bitcoin is trading risk-on/risk-off and failing its anti-system safe-haven narrative, making precious metals the more credible geopolitical hedge.

Michael Batnick Managing Partner, Ritholtz Wealth Management 10:57

Gold/silver hedge geopolitical risk, Bitcoin doesn't.

Michael Batnick Managing Partner, Ritholtz Wealth Management 14:33

Mag Seven underperforming; rotation broadening.

The Mag Seven versus the rest-of-market ratio is breaking down; mega-cap tech has been underperforming the broader market and he likes the idea of passing the baton to other areas.

Michael Batnick Managing Partner, Ritholtz Wealth Management 15:00

Small caps breaking out after long lag.

Small caps have badly lagged for years, but the Russell 2000 is breaking out and has been beating the S&P 500 and Nasdaq since the April lows; he sees economic reacceleration, strong earnings/GDP, and less sensitivity to long-end yields supporting the rotation, and explicitly calls it the year of small caps.

Ben Carlson Director of Institutional Asset Management, Ritholtz Wealth Management 26:05

Multifamily real estate faces delinquency stress.

Freddie Mac multifamily serious delinquencies are higher than during the GFC; this is not renters falling behind but apartment owners who borrowed aggressively in a low-rate world now struggling to service and refinance as rents fall, so multifamily real estate faces stress.

Ben Carlson Director of Institutional Asset Management, Ritholtz Wealth Management 39:29

Housing market healing as mortgages normalize.

The mortgage-rate mix is normalizing, with more mortgages now at 6% or higher than at 2.9% or lower, so fewer homeowners are locked into ultra-low rates; this should support housing activity and transactions as the market heals.

Michael Batnick Managing Partner, Ritholtz Wealth Management 62:26

Buy geopolitical dips while earnings hold.

He expects a repeat of last year's pattern: geopolitical shocks cause quick equity corrections, but if earnings and the economy remain fine, the market rallies; he does not think tariff or Greenland-type threats alone will cause a lasting 10% S&P 500 decline.

Small Caps Are Back | Animal Spirits 448

Summary

Ideas

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