Small-cap stocks surge 20% year-to-date, nearly doubling the S&P 500’s gains amid rotation from mega-cap tech.
The Russell 2000 index has risen approximately 20% year-to-date, outperforming the S&P 500 by the widest margin since 2003. This marks a sharp reversal after years of underperformance relative to large-cap growth stocks.
Small-caps have gained traction as investors pivot from expensive AI-driven mega-cap stocks toward domestically focused companies. The iShares Russell 2000 ETF (IWM) trades at a P/E of 16x, below the S&P 500’s 21x, despite recent rallies.
ETFs like IWM, IJR, and VB offer exposure to the rally, tracking different small-cap indexes with varying strategies. The shift reflects growing confidence in U.S. economic resilience amid global uncertainty.