Why I Will Never Sell This Small-Cap ETF

Core Insights - Small-cap stocks are experiencing a resurgence, with the iShares Core S&P Small Cap ETF up over 7% year to date as of March 3, 2026, while large caps remain mostly flat [1] - The narrative surrounding artificial intelligence (AI) has shifted market focus towards how industries will be disrupted by AI, leading to a rotation from tech stocks to undervalued sectors, including small caps [2] - Small-cap corporate earnings have begun to rebound, with a 27% increase in earnings in the latter part of 2025, indicating a potential for stock price gains [5][6] Small-Cap Performance - Small caps have lagged behind large caps for years but are now positioned for a potential leadership role in the market [3] - The iShares Core S&P Small Cap ETF has a price-to-earnings (P/E) ratio of 18.5, significantly lower than the 27.7 multiple for the iShares Core S&P 500 ETF, suggesting substantial value remains to be unlocked [8] Economic Factors - The market had previously anticipated multiple Federal Reserve rate cuts, which could benefit small caps, but recent inflation measures have complicated this outlook [9] - Concerns about the health of the U.S. economy and slowing earnings momentum in large caps may lead to a decline in their performance, contrasting with the more stable outlook for small caps [7]