Name: Small-Cap Trade
Uploaded: 2026-01-27T21:39:38+00:00
Duration: 281 s

Speakers

Lisa Shalett — Chief Investment Officer, Morgan Stanley Wealth Management

Summary

Lisa Shalett of Morgan Stanley Wealth Management argues that the recent small-cap rally is overextended and low quality, making it a good time to take profits. She prefers broadening away from technology and the Magnificent 7 into commodities, cyclicals, and GenAI productivity beneficiaries in financials, healthcare, and energy. She also recommends adding rest-of-world and emerging-market equities and planning 2026-vintage private-market deployments in venture capital, growth equity, and private commercial real estate.

Market leadership has been shifting away from technology and the Magnificent 7.
Small caps, especially unprofitable Russell 2000 names, have sharply outperformed since October.
Shalett sees small caps as overbought with weak fundamentals and unrealistic S&P 600 earnings expectations.
She recommends taking profits in small caps and preparing for new equity index leadership.
She favors commodities, cyclicals, and GenAI productivity beneficiaries in financials, healthcare, and energy.
She recommends rest-of-world equities with a focus on emerging markets.
She suggests 2026-vintage private-market deployment in venture capital, growth equity, and private commercial real estate.

Ideas

Lisa Shalett Chief Investment Officer, Morgan Stanley Wealth Management 0:22

Leadership broadening away from tech, Mag 7.

Market leadership has been shifting away from technology companies and the Magnificent 7 as investors embrace broadening corporate earnings growth, and Shalett says much of this rotation makes sense to her.

Lisa Shalett Chief Investment Officer, Morgan Stanley Wealth Management 0:35

Favor commodities and cyclicals as leadership broadens.

As leadership broadens and earnings growth improves, Shalett says the surge in appetite for commodities and cyclicals has made sense and fits the broadening-beneficiaries theme.

Lisa Shalett Chief Investment Officer, Morgan Stanley Wealth Management 0:43

Take profits in overbought, low-quality small caps.

Shalett is skeptical of the small-cap cohort: 43% of Russell 2000 companies are unprofitable, S&P 600 earnings growth expectations of 25-30% look unattainable, and small caps are materially overbought after gains concentrated in the lowest-quality names. She says now may be an excellent time to take profits.

Lisa Shalett Chief Investment Officer, Morgan Stanley Wealth Management 3:58

Favor GenAI beneficiaries in financials, healthcare, energy.

She favors broadening into GenAI productivity beneficiaries in financials, healthcare, and energy, which can benefit as earnings growth broadens beyond technology and the Magnificent 7.

Lisa Shalett Chief Investment Officer, Morgan Stanley Wealth Management 4:05

Add rest-of-world equities, especially emerging markets.

She recommends adding to rest-of-world equities with a focus on emerging markets as part of preparing for new equity index leadership and diversification away from concentrated US leadership.

Lisa Shalett Chief Investment Officer, Morgan Stanley Wealth Management 4:10

Plan 2026 private-market VC/growth/CRE deployments.

She suggests planning for 2026-vintage deployment in venture capital and growth equity as well as private commercial real estate, citing better liquidity opportunities in private markets.

This Morgan Stanley video, published January 27, 2026, features Lisa Shalett discussing XLK, MAGS, DBC, XLI, IWM, IJR, XLF, XLV, XLE, EEM, VXUS, Venture Capital, Private Commercial Real Estate, Growth Equity. 6 trade ideas extracted by AI with direction and confidence scoring.

Speakers: Lisa Shalett · Tickers: XLK, MAGS, DBC, XLI, IWM, IJR, XLF, XLV, XLE, EEM, VXUS, Venture Capital, Private Commercial Real Estate, Growth Equity

Small-Cap Trade

Summary

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