Impressive returns from the S&P 600
These days, the S&P 500 is once again being driven higher by a limited group of stocks, namely big tech and mega caps, while most names in the index are delivering relatively humdrum returns.
Then there’s small caps. The S&P 600 index of U.S. small company stocks is in the midst of a broad-based rally that is outpacing the average large cap stock in the S&P 500* by 7.6% year to date (see the chart). Small caps are even beating the tech-heavy (and recently red-hot) Nasdaq 100 index by 5.3% for the year.
Small Caps vs. S&P 500 Equal Weight Year-to-Date Excess Returns
Bloomberg, calculations by Horizon, data as of 04/24/2026.
One big reason for that outperformance: Unlike large, multinational businesses, the small companies that make up the S&P 600 do most of their business domestically and are therefore benefitting disproportionately from the strong U.S. economic environment. Additionally, small-caps’ valuations are attractive relative to their larger cousins, prompting investors to bargain hunt in the space.
In some ways, the S&P 600 has taken the baton from the S&P 500 Equal Weight index, which was beating the S&P 500 by as much as 6.3% back in late February but has since given back nearly all of that relative outperformance.
The upshot: While the large-cap market struggles to broaden out beyond tech and mega-caps, the small cap stock universe is showing itself to be a key component of outperformance in 2026. With this week’s initial release of first-quarter gross domestic product (GDP) data, we’ll get an updated view of the economic conditions that have been helping drive the small-cap rally. Continued resilience would support the case that cyclical, domestically oriented market segments (such as small caps) could continue to outperform.