US Small Caps: A Big Case for Broadening Equity Exposure

Small-cap equities in the US appear poised for a potential resurgence in 2026, supported by an improving macro backdrop and a shift beneath the surface of equity markets. As GDP growth is expected to accelerate, small caps may benefit disproportionately from stronger domestic activity and increased fiscal support.

At the same time, market leadership looks set to broaden beyond mega-cap names, with small-cap earnings growth already strengthening and narrowing the gap versus large caps. A likely rotation back toward quality after 2025’s “low-quality” rally could further reward active managers focused on fundamentally resilient businesses.

Against a backdrop of high return dispersion within benchmarks such as the Russell 2000, skilled stock selection may be especially important in capturing mispriced opportunities while managing risk.