Small Caps Outperform Large Caps in Historic Streak

Small-cap stocks are enjoying a remarkable winning streak, with the Russell 2000 index outperforming the S&P 500 for twelve consecutive trading days—the longest such stretch since June 2008. The appeal of small caps lies in their domestic focus. These companies generate most of their revenue within the United States, providing a buffer against international trade policy shifts that affect larger, globally-exposed corporations. This positioning has made them particularly attractive during the current period of tariff uncertainty. The performance gap is striking: the Russell 2000 has climbed more than 7% in 2026, while the S&P 500 remains flat. This divergence reflects investor preference for domestically-focused businesses amid trade policy concerns and anticipation of Federal Reserve rate cuts. Market analysts predict small caps will continue to benefit from robust U.S. economic growth and potential interest rate reductions. Lower rates typically provide greater support to smaller companies, which often carry higher debt loads relative to their larger counterparts.