US Small-Caps Stay on Top in the Second Quarter

Small- and micro-cap stocks continued to lead US equities in the second quarter, helped by solid economic activity, improving earnings, and strong exposure to the AI buildout.

Performance was broad enough to include many sectors, with technology driving much of the advance and industrials, health care, and financials also contributing. Valuations remain attractive versus large caps, even after a strong run, which supports the case for active investors focused on fundamentals.

Risks remain from geopolitics, inflation pressures, energy volatility, and periods of higher market swings. Even so, the combination of reasonable prices and better earnings trends suggests small caps may still offer compelling opportunities ahead.