When the stock market seems to be on a roll, trending ever so higher without much interruption, there comes a point when the excess returns begin to concentrate in a single area while leaving most other worthy names behind. Today, as the broader S&P 500 hovers near its all-time high prices, a different area of the stock market (and the economy) is beginning to catch up. This run could lead investors to fantastic portfolio risk-to-reward setups; here’s where.
Small-cap stocks, as measured by the performance in the iShares Russell 2000 ETF (NYSEARCA: IWM), have fallen behind the S&P 500 by just over 1% during the past month. However bearish this may seem in the short term, one thing should be noted by watchful investors. On February 13, 2025, small caps outperformed the S&P by over 0.6% in a single trading session. This means that, on good days, small caps are beginning to see more momentum than large caps.
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