Group 1: Market Overview - In 2026, small caps have shown their importance in a diversified portfolio, rebounding from a long period of underperformance compared to large caps [1][2] - A market rotation away from technology stocks has led to increased interest in small caps, as investors seek better value and momentum [2] Group 2: iShares Core S&P Small-Cap ETF - The iShares Core S&P Small-Cap ETF tracks the S&P 600 index, which includes a quality screen requiring positive earnings in the most recent quarter and the past four quarters [4][6][9] - The S&P 600 is more tilted towards larger companies compared to the Russell 2000, which captures a broader range of stocks without stringent quality requirements [5][6] Group 3: Sector Composition - The sector composition of the S&P 600 includes financials (18%), industrials (18%), consumer discretionary (14%), technology (13%), and healthcare (11%), making it more cyclically sensitive [11] - This different sector composition allows small caps to behave differently than large caps, providing a good diversification strategy [10][12] Group 4: Investment Strategy - Maintaining exposure to small caps can help balance a portfolio that is heavily weighted in large caps, reducing the need for market timing and improving overall performance [13][14] - The current market environment suggests that small caps may perform better during periods when large-cap tech stocks underperform, highlighting their role in risk management [12][14]

Market Overview - Investors are shifting focus beyond technology for the first time in over three years, with energy and consumer staples emerging as top-performing sectors in 2025 [1] - Value and dividend stocks are experiencing a resurgence, while international equities have shown significant growth since the start of 2025 [1] Small Caps Performance - Small-cap stocks, previously overlooked, are gaining attention due to their limited exposure to technology and appealing valuations [2] - The Russell 2000 index, a benchmark for small caps, is attracting analysts' interest with notable price targets [2] Investment Case for Vanguard Russell 2000 ETF - The Vanguard Russell 2000 ETF (NASDAQ: VTWO) has a projected 25% upside over the next 12 months according to the ETF Action database [3] - The investment case for this fund is being analyzed as it heads into the latter part of 2026 [3] Small Caps vs. Megacaps - Small caps are becoming more attractive as megacaps face concentration risk, with the "Magnificent Seven" stocks declining over 10% from their all-time highs [7] - The current market environment is favoring small caps due to valuation concerns regarding megacaps and potential rate cuts [9] Earnings Growth and Valuation - The Russell 2000 is projected to grow earnings by 19% in 2026, compared to a 13% growth forecast for the S&P 500 [9] - The Vanguard Russell 2000 ETF has a price/earnings (P/E) ratio of 18, significantly lower than the 28 P/E ratio of the Vanguard S&P 500 ETF [9] Interest Rates Impact - Small companies are likely to benefit from lower interest rates, as many carry higher debt loads [8] - While current expectations for rate cuts are modest, any unexpected economic changes could prompt the Federal Reserve to consider more aggressive rate cuts [8]

Market Overview - The equity market has shown resilience despite recent selling pressure, with the S&P 500 near all-time highs and the equal-weighted S&P up 6-8% year-to-date [3][4] - There is a broad bull market, but certain sectors have been heavily impacted, particularly those exposed to AI disruptions [2][3] Sector Performance - Technology stocks are experiencing mixed sentiments, with some positive outlooks for companies like Palantir and Apple, especially with upcoming product launches [4][5] - Sectors such as oil field services, copper mining, and chemicals are performing well, indicating that not all sectors are equally affected by AI advancements [7] International Markets - Japan's market is performing strongly, with significant interest in Japanese equities due to corporate governance reforms and fiscal policies [14][17] - China continues to export disinflation, with expectations of 2-4% deflation in real estate, which may help keep global inflation in check [12] Cryptocurrency and Commodities - Bitcoin ETFs have seen significant outflows of $5.8 billion, while Abu Dhabi has invested $1 billion, indicating a divergence in market sentiment [19][20] - Gold is viewed as a safe haven amid deflationary pressures, with expectations that it may rise above $5,000 again [21][23] Small Cap Stocks - Small cap stocks are performing well, with the Russell 2000 index showing positive trends despite broader market concerns [26][27] - Wisdom Tree emphasizes the importance of small caps in their investment strategy, highlighting their historical performance and growth [25][27]

Interested in International Equities? Look to Small Caps for an Edge2026 has seen international equities perform at a healthy clip, building on a strong year in 2025. Ex-U.S. equities continue to offer some of the year's strongest opportunities, diversifying from U.S. uncertainty while also offering exposure to cheaper equities abroad. Finding the right allocation therein becomes an important task for investors and advisors alike, with small caps a potential edge to watch.See more: [How Core Bond ETF AVIG E ...

Valuation and Performance - Since the start of 2021, the S&P 500 gained more than 63%, while the Russell 2000 rose just 18%, leading to historically low small-cap valuations [1] - The Russell 2000 trades at roughly 16x forward earnings, compared to about 21x for the S&P 500, indicating a significant valuation gap that is attracting institutional attention [1] Economic Sensitivity and Future Outlook - Small caps are more sensitive to interest rates and domestic economic conditions than large-cap multinationals, with expectations of Federal Reserve rate cuts in 2026 potentially improving financing conditions for smaller companies [2] - Historically, small caps tend to outperform early in economic expansions, with the Russell 2000 outperforming the S&P 500 by an average of 12 percentage points in the first 12 months following the Fed's last five rate-cutting cycles [3] Institutional Positioning - Fund managers remain structurally underweight small caps, with allocations to U.S. small caps still below long-term averages, reflecting caution after years of mega-cap tech dominance [4] - This underweight positioning creates asymmetry, as capital rotation into small caps tends to occur quickly due to lower ownership levels [4] Market Signals - Small caps are often one of the earliest signals that capital is shifting, indicating the beginning of a new market leadership cycle [5]

Group 1 - The article does not provide any relevant content regarding company or industry insights [1]

Market Overview - The Dow Jones Industrial Average reached a milestone of 50,000 for the first time, driven by significant gains in stocks like Nvidia (+7%), Caterpillar (+6%), Goldman Sachs (+4%), JPMorgan (+4%), and Amgen (+4%) [5][9] - The Russell 2000 index experienced a notable increase of 3.6%, indicating a strong performance among small-cap stocks [4][11] - The Nasdaq and S&P 500 also showed recoveries, with gains of 2.18% and 1.97% respectively, following a period of market volatility [3][11] Stock Performance - Amazon was the worst performer in the Dow, dropping 7% after announcing higher-than-expected capital expenditures [2][16] - Other notable losers included Molina Healthcare (-27%), Stellantis (-25%), and Impinj (-23.4%) due to disappointing earnings and guidance [12] - Conversely, BILL Holdings surged by 33.5%, alongside a rebound in several cryptocurrency companies [11] Economic Indicators - The University of Michigan's Consumer Sentiment index rose to 57.3, reflecting improved current conditions, although future expectations saw a slight decline [13] - Recent labor market reports indicated rising layoffs and initial claims, contributing to investor concerns [23] Sector Trends - There is a noticeable rotation towards value stocks, reminiscent of trends observed before the Dot-Com bubble and the Global Financial Crisis [1] - Despite the recovery in major indexes, the retail investing crowd has faced significant challenges, particularly in tech and growth sectors [7][21] Earnings Reports - Upcoming earnings reports include Toyota, Philip Morris, Cboe Global, and Biogen, which may influence market sentiment [25][26]

Group 1 - The current sentiment among Wall Street analysts is to invest in small-cap stocks, which are perceived as undervalued and poised for recovery [1] - The founder of Sungarden Investment Publishing emphasizes a non-traditional approach to income investing and aims to guide investors in understanding market narratives [2] Group 2 - The article does not provide specific financial data or performance metrics related to small-cap stocks or any other investment opportunities [3][4]

Group 1 - The risk of a bubble in AI stocks, particularly in large-cap technology companies like Nvidia and Broadcom, is significant, prompting investors to prepare for potential corrections [1] - Since the launch of ChatGPT in late 2022, AI stocks have outperformed the broader market, leading to a neglect of small-cap stocks, which are now considered undervalued [2][3] - The S&P 600 Small Cap Index has a trailing price-to-earnings ratio of 16 and a forward-looking P/E ratio of 16.4, both below long-term averages, indicating potential investment opportunities in this segment [3] Group 2 - In the event of a market correction, dividend-paying value stocks are seen as a defensive strategy against overvalued tech stocks, which have been favored by investors [5] - The Schwab U.S. Dividend Equity ETF (SCHD) has recently shown signs of recovery, contrasting with the stagnation of many AI-related stocks, suggesting a potential shift in investor sentiment [6] - The energy and basic materials sectors, excluding gold, are highlighted as areas for deeper investment exploration, as tangible assets are favored in uncertain market conditions [7]

Core Viewpoint - US small-cap stocks are experiencing a notable moment, with expectations that this trend will continue due to macroeconomic factors such as falling interest rates and economic growth [1][12]. Group 1: Market Performance - The Russell 2000 Index recently ended its longest streak of outperforming large caps since 1996, but strategists remain optimistic about small caps as a way to capitalize on a broadening bull run in the stock market [1][12]. - Small caps outperformed the S&P 500 for the first 14 trading days of the year but have since trailed behind [4][14]. Group 2: Economic Factors - Expectations for small caps are based on a combination of strong economic growth and declining interest rates, which are seen as macro forces that can drive these stocks higher [3][14]. - The potential for AI to act as a productivity booster is expected to benefit small and mid-cap stocks, which typically start from a lower profitability base [8][14]. Group 3: Investment Strategies - Analysts recommend going long on regional banks, transportation stocks (excluding airlines), and the consumer discretionary sector as part of a strategy to invest in small caps [9][14]. - There is a belief that fiscal stimulus, including tax reforms, will provide a boost to small caps in fiscal 2026 due to their exposure to the US economy [9][14]. Group 4: Market Characteristics - Small caps are characterized as "the most American equities," deriving more of their revenues domestically compared to larger peers, which positions them well for benefiting from a potentially broadening US economy [10][14]. - The cumulative market value of the Russell 2000 is $3.6 trillion, which is less than the market capitalizations of mega-cap companies like Apple, Alphabet, and Nvidia [12][14]. Group 5: Risks and Volatility - As larger investors rotate into the small-cap space, there is a risk of increased volatility due to the relative low liquidity of these stocks, which may lead to larger price swings [10][11][14]. - Analysts suggest that heightened volatility will become a norm rather than an anomaly in the small-cap market [11].