Refining Small Caps

The last decade has been a story of large cap outperformance. Since December 2004, the Russell 3000 Index has grown nearly five-fold, largely on the strength of the large cap companies in the Russell 1000 Index. The market capitalization of the next two thousand companies in the Index has fallen from a high of 10.8% in the spring of 2006 to a twenty-year low of 4.6% in the summer of 2025. You can make the argument that large cap stocks are expensive or that U.S. small caps are cheap. We will focus on the latter, with small cap valuations low versus their larger peers as well as against their own history. Starting at a low in valuations and weaving in multiple tailwinds that could support small cap performance in the years ahead, we believe now may be the time for investors to take a second look.

To read the full thought piece, please use the link below.