Needham's Chris Retzler on what's driving the rally in small caps

• Russell 2000 is up over 18% YTD, outperforming the S&P 500's 10.5% gain.
• Key drivers for small-cap growth include filtering down of hyperscaler capex (over $700 billion), infrastructure build-out, and military modernization (drones, hypersonic missiles).
• Companies are hiring, expanding, and re-shoring jobs, driven by stable policy and strong demand in these industrial and tech-related sectors.
• Retzler's fund is up 74% YTD, and he suggests rebalancing by trimming outperforming names and rotating into other growth areas within small caps.
• He notes that the underlying credits and investment drivers are much stronger now compared to past periods of high expectation like 2000.

Chris Retzler, Portfolio Manager of Needham Small Cap Growth Fund, discusses the strong rally in small caps, with the Russell 2000 up over 18% YTD. He attributes this outperformance to stability, corporate expansion, significant capital expenditures in areas like hyperscalers, infrastructure, and military modernization. Retzler expresses high enthusiasm for the current economic environment and small-cap prospects.