economy

January 16, 2026

The biggest gains in early 2026 have come from small-cap stocks

If the first few trading sessions of the year are any indication, 2026 is set to be the year of the small-cap trade.

The biggest gains in early 2026 have come from small-cap stocks

TL;DR

  • The Russell 2000 hit all-time highs early in 2026, up 7.8% year-to-date, significantly outpacing the S&P 500's 1.5% gain.
  • Key drivers for the small-cap surge include anticipated Federal Reserve rate cuts and strong U.S. economic growth.
  • Small caps are more sensitive to U.S. economic conditions and Fed policy compared to overseas businesses.
  • Investors have been net buyers of small caps, adding $6.4 billion in 2025, while selling mid-cap and large stocks.
  • Technical strategists project potential rallies for the Russell 2000, with targets between 2,861 and 3,126.
  • The Russell 2000's relative strength index at 71 suggests it is overbought, potentially signaling a near-term pullback.
  • The iShares Russell 2000 ETF (IWM) has recently outperformed the Invesco QQQ Trust over the past three months.

Continue reading the original article