Small-Cap Stocks Have Been Waiting Years for Their Moment. Is It Finally Here?
This year's outperformance of the S&P 500 may only be the beginning.
Overview
Small-cap investors have been waiting a long time for this moment. For most of the past 15 years, small stocks have lagged the S&P 500. But in 2026, things are beginning to reverse, as shown by two exchange-traded funds (ETFs). The Vanguard Small-Cap ETF (NYSEMKT: VB) is outperforming the Vanguard S&P 500 ETF by 6% year to date.
We've seen these kinds of rallies before in small caps only to see them fizzle out within six months to a year. The recovery from the COVID bear market was a prime example. From the March low of 2020 through the end of the year, the Vanguard Small-Cap ETF beat the S&P 500, gained nearly 100%, and outperformed the S&P 500 by 29 percentage points.
Details
The big question now is whether 2026's rally is just another rally-and-fade or is sustainable. Current evidence suggests it might be the latter.
Source
Originally published at www.fool.com.