For 2025, small-cap stocks have experienced a significant turnaround, outperforming large caps, especially in the past 6 months. During this period, the December Russell 2000 futures rose 16%, while the December S&P 500 was up 11%. Driven by lower rates, economic resilience, and a shift away from concentrated large-cap tech rallies, the Russell 2000 is showing substantial gains alongside higher earnings growth expectations for small firms. However, overall valuations remain historically low compared to large caps.
