Small Caps Had a Strong First Half of 2026
- Measuring Small Cap vs. Large Cap Performance: The chart tracks the first half performance spread between U.S. small caps and large caps since 2005.
- A Look at the Data: Small caps have trailed large caps in 14 of the past 21 first halves, including steep underperformance in 2020 (-10.0%) and 2024 (-13.5%). But 2026 broke that pattern decisively, with small caps outperforming large caps by 12.3%.
- Investment Implications: A sharp reversal after years of small cap underperformance may signal a shift in market leadership, though one strong half does not confirm a durable trend. Investors with diversified exposure across market caps are positioned to benefit from rotations like this without needing to correctly time them.
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