As of this week, the Russell 2000, an index of small-cap stocks, is up 15.9% year to date, surpassing the S&P 500’s 13.4% gain. Small companies, often overlooked in favor of their larger counterparts, show promising growth with an average forecasted earnings growth of 189.8% and sales growth of 67.5%. In contrast, the S&P 500 is expected to see only 28.9% earnings growth in the third quarter.
The trend reflects a significant shift in market dynamics, as small caps had previously lagged behind. For example, the Russell 2000 gained only 15.2% in 2023 compared to 24.2% for the S&P 500. Valuations for small caps remain low, trading at approximately 85% of the valuation of larger stocks, which historically averages closer to 100%. This positions small-cap stocks as attractive opportunities for future growth.
The upcoming “2026 Midterm Mayhem” event on September 29 aims to explore these developments further, emphasizing how investors can identify potentially successful small-cap stocks amid a changing market landscape.
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