Carillon Tower Advisers, an investment management company, released its fourth-quarter 2025 investor letter for the “Carillon Eagle Small Cap Growth Fund”. You can download a copy of the letter here. Small-cap stocks delivered marginal gains in the fourth quarter of 2025. The Russell 2000® Value Index outperformed the Russell 2000® Growth Index in the quarter, with more balanced results. In line with the broader stock market, small-cap stocks delivered solid results in 2025. The Russell 2000 Growth Index re ...

Quick Read iShares Russell 2000 ETF (IWM) gained 6.8% in 2026 versus a 0.1% S&P 500 decline. IWM returned 17.6% over the past year. Fed cut rates three times in 2025 to 3.50%-3.75%, reducing borrowing costs for the Russell 2000 ETF’s small caps. Russell 2000 earnings grew 12% in late 2025, outpacing large caps for the first time since 2021. A recent study identified one single habit that doubled Americans’ retirement savings and moved retirement from dream, to reality. Read more here. The S&P 500 ...

Morgan Stanley is delivering a decisive message to investors: the bull market is broadening, and the next big move isn't in mega-cap tech. While Chief Strategist Mike Wilson remains constructive on the "AI enabler" complex, he is signaling a major transition toward under-owned small-cap sectors. In a research note shared with TheStreet, Wilson identifies a "pause that refreshes" for big tech, creating a clear opening for the Russell 2000 to lead. As the U.S. economic "gas pedal" stays down with a 2.6% GDP ...

Core Insights - Small-cap stocks provide the highest long-term returns among major asset classes but often receive little attention from investors, especially when large-cap tech dominates the market [2] - The Vanguard Russell 2000 Index Fund ETF Shares (VTWO) offers diversified small-cap exposure at a very low cost, making it an attractive option for investors [2][3] Small-Cap Diversification Role - VTWO tracks the Russell 2000 Index, comprising over 700 smaller U.S. companies, providing broad diversification at an annual cost of just 0.07%, one of the lowest in the small-cap category [3][7] - The fund has $14.5 billion in assets, balancing liquidity with tight index tracking, making it accessible for various investors [3] - VTWO's exposure to small-cap stocks comes from companies in their growth phase, with diversification across sectors like healthcare, industrials, financials, and technology, ensuring no single holding exceeds 2% of the portfolio [4] Performance Reality Check - Small-cap stocks have faced challenges in recent years, with VTWO's 17.32% gain over the past year lagging behind the large-cap tech rally driven by AI infrastructure spending [5] - Over ten years, VTWO returned 218.63%, significantly underperforming the NASDAQ-100, which surpassed 500% [5][7] - This underperformance is attributed to small caps' structural sensitivity to the rising interest rate environment that began in 2022 [5] Cost Efficiency and Performance - VTWO tracks its benchmark with minimal slippage due to its low expense ratio, with a five-year return of 28.01% showcasing the compounding benefits of Vanguard's cost advantage [6] - Compared to the iShares Russell 2000 ETF (IWM), VTWO's lower fees result in measurable outperformance over time, emphasizing the importance of cost in long-term index tracking [6]

Core Insights - Small-cap stocks and ETFs may not always outperform larger indices but can offer significant hidden investment opportunities [1] Group 1: Avantis International Small Cap Value ETF - The Avantis International Small Cap Value ETF (AVDV) provides excellent diversification, focusing solely on international small-cap value stocks with a 0.36% expense ratio and a 2.84% yield [2] - AVDV consists of over 1,600 stocks, with less than 10% of total assets in its top 10 holdings; seven of these have more than doubled in value over the past year, particularly in the gold and precious metals sectors [3] - The fund has achieved an annualized return of 15.6% over the past five years and has increased by over 60% in the last year, showcasing the potential of small-cap investments [4] Group 2: Dimensional U.S. Small Cap ETF - The Dimensional U.S. Small Cap ETF (DFAS) aims to maximize returns while minimizing federal income taxes, featuring a 0.27% expense ratio, a 0.94% yield, and an annualized return of 11.5% over the past decade [5] - DFAS is diversified across more than 2,000 stocks, with its top 10 holdings constituting only 3% of total assets; nine of these holdings have increased in value over the past year, with six more than doubling [6] - Financial and industrial stocks account for nearly 40% of the fund's assets, with technology, consumer cyclicals, and healthcare also contributing significantly to returns [7] Group 3: Schwab Fundamental U.S. Small Cap Company ETF - The Schwab Fundamental U.S. Small Cap Company ETF (FNDA) includes over 800 small-cap stocks, emphasizing value; seven of its top 10 holdings have risen by over 100% in the past year, although these holdings represent only 5% of total assets [8] - FNDA also focuses heavily on industrial stocks, which make up more than 20% of the portfolio, alongside financials, consumer cyclicals, technology, and real estate, each exceeding 10% of total assets [9] - The fund has generated an annualized return of 11.8% over the past decade, with a 0.25% expense ratio and a 1.15% yield [9]

Core Viewpoint - The stock market in 2026 has been unfavorable for small-cap stocks, especially for those that were once high-flyers during the pandemic, such as Peloton Interactive, Inc. (PTON) [1] Company Summary - Peloton Interactive, Inc. has been facing significant struggles in the current market environment [1] - The company is categorized as a "fallen angel," indicating a decline from its previous peak performance during the pandemic [1] Industry Context - The analysis highlights the broader challenges faced by small-cap stocks in the current market, particularly those that experienced rapid growth during the pandemic and have since seen a downturn [1]

Core Viewpoint - The stock market in 2026 has been unfavorable for small-cap stocks, especially for those that were once high-flying during the pandemic, such as Peloton Interactive, Inc. (PTON) [1] Company Summary - Peloton Interactive, Inc. has been facing significant struggles in the current market environment [1] Industry Summary - The experience of analysts covering technology companies and working in Silicon Valley highlights the ongoing themes affecting the industry, with a focus on the challenges faced by companies like Peloton [1]

Core Insights - Warren Buffett's leadership of Berkshire Hathaway has resulted in a remarkable 5.5 million percent gain over 60 years, establishing him as a potentially historic investor [1] - Despite an average return of 19.9% from 1965 to 2024, Berkshire's largest annual gains occurred decades ago when the company was significantly smaller [2] - Buffett has indicated that future performance will not match past results, citing the law of large numbers as a contributing factor to the slowdown in growth [3][4] Company Growth Dynamics - The law of large numbers suggests that substantial growth is easier from smaller starting points, which is why small-cap stocks often outperform larger companies [3] - Buffett has expressed that size can negatively impact investment performance, emphasizing the advantages smaller investors have [4] - For Berkshire, turning a $100 million investment in a small-cap company into $1 billion would yield a $900 million profit, which is minimal compared to its over $380 billion cash reserves [5] Regulatory Considerations - If Berkshire seeks to acquire more than 5% of a small-cap company's voting shares, it must file a Schedule 13D with the SEC, which involves regulatory challenges and public disclosure [6] - Retail investors do not face the same regulatory hurdles, allowing them more flexibility in investment opportunities [6] Investment Opportunities - The Vanguard Small Cap Index Admiral Shares is highlighted as a straightforward way for investors to gain exposure to a diversified index of small U.S. companies [7]

Core Viewpoint - The Vanguard Russell 2000 ETF was initially expected to outperform the S&P 500 in 2025, but the S&P 500 delivered a higher return due to the AI surge [1][2]. Group 1: Investment Thesis - Small-cap stocks were trading at their greatest valuation gap relative to large caps in over 25 years, with a price-to-book ratio of 2.1 for Russell 2000 components compared to 5.0 for S&P 500 companies [3]. - Falling interest rates generally favor smaller companies, as they are more reliant on borrowed money, leading to increased investment in riskier assets like small-cap stocks [4]. Group 2: Current Outlook - Despite the S&P 500's outperformance, a 13% return for the Vanguard Russell 2000 ETF is considered solid historically, and the ETF is viewed as a long-term investment [5]. - The valuation gap between small caps and large caps has widened further, suggesting potential for small caps to outperform in the coming decade, similar to trends observed during the dot-com boom [6]. - Experts anticipate that interest rates will continue to trend lower, and regulatory support from the Trump administration may benefit small-cap companies [7].

Core Insights - The article emphasizes the importance of including mid-cap stocks in investment portfolios alongside small-cap and international stocks [1] Group 1 - Mid-cap stocks are often overlooked but can provide significant growth opportunities [1] - Investors are encouraged to diversify their portfolios by adding mid-cap exposure to balance risk and return [1]