High-flying small cap stocks are losing their lustre, suggests BCA Research.

In a research note, the independent research firm points out that large cap stocks are leading the recent rebound in global equities, which is a notable change from earlier trends.

“Small capitalization stocks had consistently outperformed since the equity uptrend began in 2003. Robust profit growth, abundant liquidity and low interest rates had disproportionately favored small caps over their larger counterparts,” BCA says.

“However, in recent weeks, small caps stocks have badly lagged even as the global equity index has hit a new cyclical high,” it notes. “This suggests that a change in leadership is underway, as investors gravitate to more reliable earnings stories ahead of a moderation in global economic growth and ongoing monetary tightening.”