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Small Caps, Big Concentration: What Q1 2026 Told Us About the Russell 2000
Return concentration in the Russell 2000 was heavily skewed toward energy:
- Energy outperformed the index by nearly 37%, standing out as the clear driver of performance.
- Materials, the second-best sector, lagged far behind with just +5.2% relative outperformance.
- Perhaps most notably, the top 50 stocks accounted for 447% of the total index return. A small subset of names did not just lead the market; they effectively defined it.
What does this mean?
- These dynamics highlight limited breadth in small cap performance during the quarter and reinforce the importance of sector exposure and stock selection for investors.
- Passive exposure may not have delivered the typical experience investors expect.
Quality Factors Led During 1Q26 Despite a Soft March
Source: Furey Research Partners, FactSet; Russell 2000 Index as of 3/31/26.
Narrow Market Performance in 1Q26
Energy outperformed by almost 37%!
It was the fourth best relative performance by a top sector in any quarter since 1985
Source: Furey Research Partners, FactSet; as of 3/31/26.
Russell 2000 Return Concentration
Top 50 stocks amounted to more than 400% of the Russell 2000 Index 1Q26 total return
Source: Furey Research Partners, FactSet; as of 3/31/2026.
For more small caps observations click here.
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Past performance is not indicative of future results. The information provided in this report should not be considered financial advice or a recommendation to purchase or sell any particular security.
Differing historical time periods are selected throughout the presentation as we believe specific periods provide the most informative historical analog for the concepts presented.
The Russell 2000® Index measures the performance of the small cap segment of the U.S. equity universe. The Russell 2000 Index is a subset of the Russell 3000® Index representing approximately 10% of the total market capitalization of that index. It includes approximately 2000 of the smallest securities based on a combination of their market cap and current index membership. The volatility (beta) of the portfolios may be greater or less than the benchmark. It is not possible to invest directly in this index.
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