Small cap (e.g.Russell 2000) has been underperforming compared to Large Cap stocks (e.g SP500) in the last a couple of years. Wonder if it's something that will change soon.
Many things distorting Large vs. Small nowadays. I think it's mainly about multiple recalibration: See Yardeni PE charts here: Stock Market P/E Ratios - Yardeni Research
We went from big tech/consumer being waaaaay to cheap following the GFC crysis to now trading at a large premium (not saying necessarily expensive). On the other hand, smallcaps did the reverse.
On top of that imo we live in a US political era where the winner takes all, megacaps can do as they please with almost no antitrust headwind (so far), whereas smallcap gets eaten or destroyed by scale.
Then there is the massive overlapping flows into the S&P500 from passive investing. I am not in the hardcore "passive destroying price discovery" market camp but imo it has to have some impact. Nobody buys IWM in their 401K. But SPY and QQQ! And international investors either buy MSCI Wolrd (which is 70% US largecaps) or - guess what - SPY and QQQ... In this huge Venn diagram of global flows, S&P500 stocks are in the center, most likely getting 80%+ of every dollar invested passively worldwide. "Smallcaps" are a tiny blip in there and REAL smallcaps or microcaps are not even in common ETFs.
Last but not least, smallcap indices get junkier by the minute (good stocks graduate into mid/large or are acquired, startups stay private longer and IPO directly as a multi-billion $ Co., most new additions to smallcaps are cashburners and fallen angels)...
Unless there is a huge deregulation and pro-smallbiz policy shift while simultaneously pushing for stricter antitrust laws, I don't see a broad smallcap index comeback. Such promises were made last year but we got tariffs instead (which hit mainly smallcaps sad trombone sound)
However, I don't think we need a revival of broad smallcap outperformance. The current situation is actually awesome. Russell2000 underperformance keeps smallcaps unsexy and cheap. But the cyclical rotation through all the junk can make you big $$$. I don't want a broad smallcap rally. I want a cyclical unsexy mess that I can ride including deep value acquisition targets, boom-bust shitcos, miners who happen to hit a lucky commodity rally, etc.
There are even strategic smallcap value ETFs which were able to keep up with SPY such as AVUV or XSVM.
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