U.S. Small Cap Stocks – S&P 600 / S&P 500 Pressure is mounting on U.S. small caps. The S&P 600 has broken below its 50-day moving average, ending a run of outperformance that began in late 2025 after nearly five years of lagging the S&P 500. Image: BCA Research
Small Cap Equity Positioning Small caps are still being overlooked. Positioning is only in the 41st percentile, far from crowded and with plenty of room for investors to add exposure. Image: Deutsche Bank Asset Allocation
Small Cap Stocks – Russell 2000 > 10% Gain for the Month Bulls are smiling again! The Russell 2000’s 10.9% gain in November is a promising sign for small-cap stocks over the next six months, with an average increase of 11.3% since 1979 and gains occurring 90% of the time. Image: Carson Investment Research
Performance – U.S. Small Cap Stocks vs. Large Cap Stocks Small caps continue to face significant challenges relative to large caps, a trend that has persisted for several years. However, there is a growing sense of cautious optimism about their potential recovery as market conditions change. Image: BofA Global Research
U.S. Small Cap Stocks vs. U.S. Large Cap Stocks U.S. small caps are currently viewed as an attractive investment opportunity compared to U.S. large caps, with several factors suggesting potential outperformance over the next decade. Image: BofA Global Research
Performance – Large Cap Growth vs. Small Cap Value Large-cap growth stocks are outperforming small-cap value stocks at a level not seen since the dot-com bubble era. Historical patterns and the potential for economic recovery indicate that this trend may change in the long term. Image: BofA Global Investment Strategy
Cumulative Large Cap vs Small Cap Equity Flows Since 2021, U.S. large-cap funds have seen significantly higher inflows compared to U.S. small-cap funds, highlighting a broader trend of investor preference for larger, established companies. Image: BofA Global Investment Strategy
U.S. Small Cap Fund Flows The recent surge in inflows to U.S. small-cap funds highlights a favorable outlook on small-cap stocks as an investment option, as investors appear to be reallocating some of their assets toward this market segment. Image: BofA Global Investment Strategy
Performance – Large Cap vs. Small Cap The durability of the rotation from U.S. large caps to U.S. small caps remains to be seen as the market assesses the implications of changing inflation and rate expectations. Image: Goldman Sachs Global Investment Research
S&P 500 – Russell 2000 (Small Caps) Outperforms Russell 1000 (Large Caps) by 3% of More Historically, when small caps have outperformed large caps by 3% of more, the S&P 500 has been higher a year later in every instance, with an average gain of 32% since 1979. Image: Carson Investment Research
Small Cap Stocks – Relationship Between Relative Fwd P/E of Russell 2000 vs. Russell 1000 and Subsequent 10-Year Annualized Relative Returns For long-term investors, periods when small-cap stocks are trading at a significant discount to large-cap stocks may offer attractive investment opportunities. Image: BofA US Equity & Quant Strategy