3 Reasons Small-Cap Stocks Could Outperform in 2026 -- and 1 Fund to Buy Now

• Small-cap stocks person trailed ample caps for 15 years -- an humanities anomaly.

• Eras of small-cap and large-cap outperformance mostly past 6 to 16 years.

• There are 3 reasons to judge a small-cap comeback could commencement successful 2026.

• 10 stocks we similar amended than iShares Trust - iShares Russell 2000 ETF ›

Small-cap stocks, oregon publically traded companies valued anyplace from $300 cardinal to $2 billion, lagged the broader markets successful 2025. The Russell 2000, which tracks the show of 2,000 small-cap stocks, returned 12% implicit the past twelvemonth compared to the S&P 500's 17% rise. While not a immense gap, the underperformance is portion of an ongoing 15-year streak of tiny caps trailing large-cap companies.

Yet, this 15-year tally is an humanities anomaly. It's been good documented that tiny caps person outperformed ample caps implicit the past century, beating them by an mean of 2.85% a twelvemonth since 1927. And for each 10-year investing window, tiny caps bushed ample caps two-thirds of the time.

For context, the S&P 500's mean yearly summation of 10.37% since 1927 would person turned $100 into a whopping $1.75 cardinal with dividends reinvested. But erstwhile you tack connected the other 2.85% successful mean yearly outperformance that tiny caps enjoyed, the fig swells to $21.8 million.

What's astir absorbing to maine is that small-cap and large-cap marketplace enactment tends to tally successful cycles, with ample caps starring the mode from 1946 to 1957, from 1969 to 1974, from 1999 to 2010, and astir precocious from 2011 to 2026, according to information compiled by Wellington Management. This means that this streak of large-cap dominance hasn't conscionable lasted longer than usual; it's the longest epoch of large-cap marketplace enactment connected record.

Of course, large-caps' large tally can't past forever. And increasingly, a fig of large banks and organization heavyweights are forecasting the extremity of an epoch successful 2026, arsenic ample caps yet manus implicit the baton to tiny caps, and the humanities norm reasserts itself.

In their yearly concern outlooks for 2026, Vanguard forecast importantly much imaginable upside for tiny caps, portion Invesco called tiny caps attractively valued. Meanwhile, Chris Hyzy, main concern serviceman of Merrill and Bank of America Private Bank, pointed to tiny caps arsenic 1 of respective imaginable tools to "power your investments into a caller epoch of growth."

Small caps and ample caps seldom commercialized their marketplace dominance each twelvemonth oregon so; the runs of outperformance past implicit six years connected average. So the question of whether tiny caps could beryllium astir to wrest enactment from their bigger siblings is apt 1 of multi-year importance. And determination are 3 reasons to judge that tiny caps volition outperform this year.