Small-Cap Stocks Outperform In Volatile Market

Small-cap stocks are taking the lead amid ongoing market volatility and geopolitical uncertainty. Defined as any stock with a market capitalization of $10 billion U.S. or less, small-caps have underperformed mid-sized and large-cap stocks for the better part of a decade. However, there are signs that small caps are mounting a comeback as global markets continue to seesaw between gains and losses. The Russell 2000 (RUT), which is the leading index of small-cap stocks and whose constituents have an average market value of $4 billion U.S., has gained 22% since the mid-April market low following U.S. President Donald Trump’s tariff announcements. That’s ahead of the benchmark S&P 500’s (SPX) 21% gain over the same time period. News that President Trump has scaled back and paused much of his tariffs has been a boon for small-cap stocks, which are more sensitive to the economy than large-cap stocks.The Russell 2000 index needs to gain another 12% to reclaim its record high of 2,442 reached last November after President Trump was re-elected. Some analysts expect the small-cap index to make a run at a new all-time high over the summer. Small-cap stocks that have lifted the Russell 2000 index higher include Chili’s restaurant owner Brinker International (EAT), LaCroix sparkling water maker National Beverage (FIZZ), and data protection software provider Commvault Systems (CVLT).Additionally, several small-cap stocks have recently held successful initial public offerings (IPOs), including space company Voyager Technologies (VOYG) and online trading platform eToro (ETOR).