Capital Economics is warning that the powerful shift underway in U.S. equities could signal that a long‑running stock market bubble will burst in 2027, ushering in years of upheaval in leadership across major indexes.
In a Feb. 20 note, John Higgins, chief markets economist at Capital Economics, argues that the recent outperformance of small-cap, value, and defensive stocks relative to large-cap, growth, and cyclical names echoes patterns seen in the late stages of the dotcom boom. “If the aftermath of the dotcom era is any guide,” Higgins wrote, “the bursting of the next bubble in the stock market—which we forecast will occur in 2027—might be followed by periods in which small-cap and value stocks outperformed their peers for a very long time.”
