Durable Small-Cap Rally Could Boost This ETF

Core Viewpoint - The resurgence of small-cap stocks and related ETFs, particularly those with value stock exposure, is a significant theme in early 2026, with small-cap stocks outperforming the large-cap S&P 500 year-to-date [1]. Group 1: Small-Cap Stocks and ETFs - The O'Shares U.S. Small-Cap Quality Dividend ETF (OUSM), valued at $932.82 million, has increased by 3.3% year-to-date, indicating strong performance among small-cap ETFs [1]. - OUSM is appealing for equity income investors seeking small-cap exposure, as traditional ETFs in this category often have low yields and limited potential for dividend growth [2]. - Small-value portfolios focus on small US companies with lower valuations and growth rates compared to their peers, defined as stocks in the bottom 10% of the US equity market capitalization [3]. Group 2: Market Sentiment and Economic Factors - There is a growing sentiment among professional investors that market breadth is widening, leading to increased interest in smaller stocks as potential winners outside the mega-cap growth sector [5]. - Factors supporting small-cap performance include expectations of continued interest rate cuts by the Federal Reserve and a potentially stronger-than-expected U.S. economic expansion [6]. - Geopolitical events, such as the ousting of Venezuelan President Nicolás Maduro and investigations involving Federal Reserve Chair Jerome Powell, are expected to stimulate broader market investment in 2026 [7].