Name: Small and mid cap stocks are looking much more attractive, says Northwestern's Matt Stucky
Uploaded: 2026-01-26T22:01:03+00:00
Duration: 296 s

Speakers

Matt Stucky — Chief Portfolio Manager, Northwestern Mutual

Summary

Matt Stucky of Northwestern Mutual Wealth Management argues that small-cap underperformance has run its course and that the Russell 2000 can keep outperforming as rate cuts help earnings revisions and valuation spreads compress. He also sees small and mid-cap AI adopters as the next leg of the AI trade and warns that mega-cap tech concentration raises market risk. The discussion touches on inflation data as a possible catalyst for Fed cuts and the risks from higher rates or unemployment.

Matt Stucky expects small-cap outperformance to continue, driven by rate cuts, improving earnings revisions, and valuation compression.
He says narrow market breadth and high rates had held back cyclicals and small caps.
He views small and mid-cap companies as potential AI productivity beneficiaries because they are more labor intensive.
He respects mega-cap tech quality but sees elevated concentration and AI-correlation risk.
He watches a downside wedge between daily deflation data and CPI as a possible disinflationary signal.
He flags higher rates or unemployment as historical drivers of market corrections.
The interview is positioned ahead of Big Tech earnings.

Ideas

Matt Stucky Chief Portfolio Manager, Northwestern Mutual 0:36

Small-cap outperformance can persist via rate cuts

Small caps look attractive because market breadth has been historically narrow: only 20-30% of S&P 500 constituents outperformed the index from 2023 to 2025, versus a typical mid-to-upper-40s share. Higher rates hurt cyclicals while infrastructure spending drove growth; as rates come down and more cyclical parts of the economy pick up, earnings revisions are improving across sectors, including small caps. If the Fed continues cutting rates, those revisions have room to run, and the small-vs-large valuation spread can keep compressing, which is the recipe for continued small-cap outperformance.

Matt Stucky Chief Portfolio Manager, Northwestern Mutual 4:09

Mega-cap concentration raises market risk

Mega-cap tech quality and earnings growth are respected, but market concentration is unusually high and AI-related correlations are rising. If these names disappoint, the risk profile is elevated, making the group a setup to monitor rather than a clear avoid.

Matt Stucky Chief Portfolio Manager, Northwestern Mutual 4:26

Small/mid-cap AI adopters offer next leg

The next leg of the AI trade may be companies that actually use the products designed and disseminated by the Mag 7, not just the builders. Small and mid-cap companies are more labor intensive than mega-cap tech, so if AI unlocks productivity, those adopters could see greater earnings leverage.

This CNBC video, published January 26, 2026, features Matt Stucky discussing IWM, US small-cap stocks, MAGS, Mega-Cap Tech, US Small and Mid-Cap Stocks. 3 trade ideas extracted by AI with direction and confidence scoring.

Speakers: Matt Stucky · Tickers: IWM, US small-cap stocks, MAGS, Mega-Cap Tech, US Small and Mid-Cap Stocks

Small and mid cap stocks are looking much more attractive, says Northwestern's Matt Stucky

Summary

Ideas

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