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The Magnificent 7 made index concentration a familiar large cap story. Increasingly, concentration is shaping the small cap market as well.
Historically, the Russell 2000 was relatively insulated from this dynamic. Since the pandemic, that has begun to change and the second quarter of 2026 offered a striking example:
- The index’s top 25 stocks accounted for almost twice their historical average contribution during quarters when the Russell 2000 gained 10% or more.
- The quarter was the third-most concentrated among the Russell 2000’s strongest quarters, trailing only the fourth quarter of 1999 and the third quarter of 2025.
- Bloom Energy delivered the largest single stock contribution of any quarter in which the index returned at least 10%.
- Just 10 stocks generated 18% of the Russell 2000’s total quarterly return.
The Russell reconstitution process, and the shift to a semiannual schedule, should help refresh index membership more frequently and reduce the potential impact of excessive security level concentration over time.
For active managers, a more frequently refreshed and broadly representative benchmark may provide a healthier environment for fundamental research and security selection to be reflected in relative performance, rather than results being disproportionately dictated by a handful of index constituents.
The broader takeaway: headline index returns do not always tell the full story. Understanding what is driving those returns, and how broadly they are distributed, remains essential.
Explore our small caps observations for deeper insight.
2Q26 Russell 2000 Return Concentration 2Q26
2Q26 returns were highly concentrated in the Russell 2000’s top stocks with the Top 25, Top 10, and top stock accounting twice or more the average for quarters in which the index returned 10% or more.
2Q26 was the 3rd most concentrated among the Russell 2000’s best quarters, trailing only 4Q99 and 3Q25. The top stock (Bloom Energy) was the highest single contribution across all quarters in which the index returned 10% or more.
Source: Furey Research Partners, FactSet; as of 6/30/2026.
Russell 2000 Return Concentration 2Q26
18% of the Russell 2000’s 2Q26 return came from its top 10 stocks
Source: Furey Research Partners, FactSet; data as of 6/30/2026.
Russell 2000 Index Reconstitution
Reconstitution resulted in greater Health Care and Financials weights, while weight declined in the Industrials and Information Technology sectors.
Source: Furey Research Partners, FactSet as of 6/30/2026.
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.
The S&P 500® Index is the Standard & Poor’s Composite Index and is a widely recognized, unmanaged index of common stock prices. It is market cap-weighted and includes 500 leading companies, capturing approximately 80% coverage of available market capitalization.
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