US small-caps are (finally!) on top

In the third quarter of 2025, a combination of high returns, lower interest rates, and a resilient U.S. economy propelled major indexes to new heights. Small-cap stocks outperformed their larger counterparts, with the Russell 2000 Index advancing significantly more than the Russell 1000 Index. The tech sector continued to drive large-cap growth, particularly companies with AI exposure; however, small-caps showcased broad-based gains across all sectors.

Despite geopolitical uncertainties and mixed economic indicators like consumer confidence and manufacturing data, the reduced interest rates have widened access to capital. This has strengthened small-cap earnings potential and positioned them for leadership moving forward. As investors navigate these conditions, opportunities in smaller stocks appear promising due to attractive valuations and anticipated earnings growth relative to their larger peers.