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SMALL-CAP RALLY GATHERS PACE AS INVESTORS BROADEN EQUITY BETS

Small-cap stocks have outperformed large caps in 2026, signaling a broadening of the recent stock market rally beyond mega-cap technology names, according to LPL Financial's Adam Turnquist.

The S&P SmallCap 600 index .SPCY has gained about 21% year to date, more than double the roughly 9% rise in the S&P 100 index .OEX , as investors rotate into sectors including regional banks, industrials, biotechnology, energy and technology.

Large-cap stocks have led much of the current bull market, supported by AI enthusiasm, strong earnings from major technology companies, passive investment flows and a preference for higher-quality companies in a high-interest-rate environment.

But small-cap stocks have ascended, helped by improving earnings expectations, a resilient U.S. economy, supportive policy developments and the domestic revenue exposure of many smaller companies.

Technical indicators also point to small-cap leadership. A ratio tracking the relative performance of equal-weight large caps against small caps has broken below a multi-year uptrend and remains below its 50-day and 200-day moving averages.

A momentum indicator — the percent price oscillator — has remained below zero for most of 2026, suggesting continued weakness in large caps relative to small caps.

"The market appears to be transitioning from a narrow, mega-cap-led bull market toward broader participation. Fundamentals remain supportive, while the technical evidence points to continued small-cap leadership over large caps," Turnquist says.

(Chibuike Oguh)

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