Hey Folks, CNBC recently reported that hedge funds have raked in $24 billion shorting software stocks so far in 2026 — and the year has barely started!
Rather than taking profits and stepping aside, they are doubling down. Nearly all major hedge funds are now net short software, and their positioning suggests they expect the carnage to accelerate dramatically before the year is over. Roughly $1 trillion in market cap has already been wiped out from the software sector alone.
But the smart money is not simply selling and sitting in cash. It is reallocating — aggressively — into areas of the market that have been overlooked and undervalued for years. The rotation has begun, and it is backed by institutional firepower from every major bank on Wall Street.
Four bull zones are emerging as the primary beneficiaries of this historic shift.
Bull Zone #1: Small Cap Stocks
The single biggest rotation happening right now is the flood of capital into small caps. Bank of America, JP Morgan, and State Street have all issued forecasts calling for small cap outperformance in 2026, and the early data is proving them right.
The Russell 2000 is up roughly 5% year to date while large cap indexes are down about 1% — a statistically significant gap this early in the year.
The drivers behind this move are structural, not speculative:
- Valuation discount — Small caps trade at a historically wide discount to large caps, a gap that Wall Street analysts view as increasingly unjustified as fundamentals improve.
- Rate cut tailwind — Smaller companies tend to carry more floating-rate debt, meaning they benefit disproportionately when the Fed cuts rates. Lower borrowing costs flow straight to the bottom line.
- Earnings momentum — Analysts are forecasting 17% earnings growth for small caps versus 14% for large caps. The earnings gap is closing, and in several subsectors, small caps are already pulling ahead.
After years of being ignored in favor of mega-cap tech, small caps are finally getting the institutional attention — and capital flows — they deserve. | | | Bull Zone #2: Basic Materials and Industrials
Basic materials have quietly posted the largest sector gains of any group in 2026. Industrials are running right behind them, and gold, metals, and mining companies have delivered outstanding performance across the board.
The thesis here is built on what analysts are calling "Physical AI" — the shift from software hype to real-world implementation:
- Infrastructure buildout — Robotics, domestic manufacturing, and AI-related construction all require massive quantities of raw materials, from copper and steel to rare earth elements.
- Industrial capacity demand — As companies move from AI prototypes to actual deployment, they need factories, warehouses, and physical infrastructure — all of which drive demand for industrial names.
- Commodity supply constraints — Years of underinvestment in mining and materials production have left supply tight just as demand is accelerating.
The irony is striking: while AI software companies are getting crushed, the companies that supply the physical backbone of the AI revolution are thriving.
Bull Zone #3: The Energy Sector
Energy stocks surged through December and January, with particularly massive breakouts across energy infrastructure components. The sector is benefiting from a catalyst that is only getting stronger — the explosion in electricity demand driven by AI data centers.
The bull case for energy is straightforward and compelling:
- AI power demand — Data centers require enormous and growing amounts of electricity, creating sustained demand for energy producers and infrastructure providers.
- Supply-side discipline — Energy companies have maintained capital discipline, keeping supply growth measured while demand accelerates.
- Infrastructure investment cycle — Grid upgrades, new generation capacity, and transmission buildouts represent a multi-year spending cycle that benefits the entire energy value chain.
Once again, the irony is hard to miss. The software companies that investors are fleeing are the very companies driving the demand that makes energy stocks so attractive right now. | | | Bull Zone #4: Gold, Silver, and Real Assets
Gold recently broke above $3,000 per ounce — a historic milestone that signals a fundamental shift in how institutional investors are thinking about portfolio construction. Silver and gold have both bounced sharply after brief pullbacks, and real assets broadly are having their strongest run in years.
The macro backdrop makes the case almost impossible to ignore:
- Inflation hedge — The Fed has resumed reserve management purchases at $40 billion per month, with expectations that the pace will expand. M2 money supply is up roughly 50% since 2020, and that kind of money creation drives investors toward hard assets.
- Silver outperformance — Silver actually doubled gold's returns in 2025, and mining stocks offer even greater leverage, often moving two to three times the underlying metal price.
- Portfolio diversification — Commodities and precious metals have historically served as powerful diversifiers during periods of inflation surprise, which is exactly the environment investors face today.
The Bottom Line...
Wall Street has flipped. The great rotation from overvalued software into undervalued real-economy sectors has begun, and it is backed by serious institutional money.
Small caps, materials, energy, and precious metals are where the capital is flowing — and the early movers are already being rewarded.
Anyways...
That's all for now!
Until Next Time,
-ZT Team | P.S. Want our text alerts? Text "ZIPTRADER" to 1-(855)-228-1598 to sign up!
(standard carrier data/text rates apply) |
|
|
|---|
|
| | 5101 SANTA MONICA BLVD STE 8 #62, 90029, LOS ANGELES, CA |
| You've received it because you've subscribed to our newsletter or are a member of ZipTraderU. |
| This email was sent to indra21poetra@gmail.com |
| BY READING THIS EMAIL & ALL ZIPTRADER CONTENT YOU AGREE: This is not financial advice. You must do your own due diligence on all information. ZIPTRADER LLC is a publishing company and we provide general information, opinions, & news coverage to viewers. However – we do not provide personalized financial advice, are not financial advisors, and our opinions are not suitable for all investors. You should not treat any opinion as expressed as a specific inducement to make a particular investment or follow a particular strategy, but just as an opinion. Use at your own risk. Past Performance is not indicative of future results, and any results presented are not typical, and should not be understood as typical. Actual results vary given a variety of factors such as experience, skill, risk mitigation practices, market dynamics and the amount of capital deployed. TRADING IS RISKY: Most traders in all markets lose all of their money (and more if they use margin). Most small businesses fail. Do NOT partake in trading, investing, entrepreneurship or any other risky endeavor covered here if you are not prepared with the reality that most fail. We reserve the right to have affiliate relationships with advertisers/sponsors. See Full Terms of Service. See Our Advertisement Disclaimer. |
| | |
|
|
|---|
|
|
|
Tidak ada komentar:
Posting Komentar