A contrarian view suggests a new political administration might deliberately implement growth-negative policies at the start of a term. This strategy, likened to a new CEO "kitchen sinking" results, clears the deck and establishes a low baseline, making subsequent growth appear more robust.
The economy did not experience a single, unified recession. Instead, different sectors contracted sequentially over three years in a "rolling recession." This process concluded in April, quietly starting a new bull market and recovery cycle that remains underappreciated, presenting an opportunity in lagging market segments.
Due to economic distortions from the COVID cycle and data lags from government shutdowns, the Fed is slower than normal to ease policy despite a weakening labor market. This delay has held back the typical market broadening, creating the specific backdrop needed for small caps to outperform large caps for the first time since 2021.