Small-cap stocks have run ahead of the S&P 500 by almost 14 percentage points over the first half of 2026 — a lead that, if it holds, would be the widest in more than 20 years. Meanwhile the large-cap benchmark ground higher on July 1, lifted by Fed Chair Kevin Warsh's remarks that inflation risks had eased.
The Russell 2000 has outperformed the S&P 500 by almost 14 percentage points through the first six months of 2026. Should that performance gap hold into year-end, it would be the largest in over 20 years, according to Bank of America equity strategist Jill Carey Hall.
Small caps out front
The Russell 2000 tracks smaller US companies, and its lead over the S&P 500 came through the first six months of 2026.
But the large-cap index kept climbing even as small caps ran ahead. In the second quarter of 2026, the S&P 500 and the Nasdaq Composite registered their best quarterly performance since 2020, while the Dow marked its best showing since 2022.
Warsh comments steady the tape
On July 1, the S&P 500 and the Dow turned positive as investors parsed Fed Chair Kevin Warsh's comments that inflation risks had eased. Warsh reiterated the central bank's commitment to its 2% goal but said price risks had come down in recent weeks.
The remarks eased worries about further rate hikes, especially with the labor market holding steady. Even so, traders still expect at least one hike this year, according to data compiled by LSEG, and Warsh declined to give forward guidance on rates.
By late morning, the S&P 500 gained 12.21 points, or 0.16%, to 7,511.57, the Dow rose 283.37 points, and the Nasdaq Composite fell 81.22 points. The Dow's advance came on the heels of another record-high close.
Even with the Dow at a fresh record, small caps hold the wider lead — a gap that, should it hold, would mark the biggest in more than two decades.
Sources: Bloomberg (snippet-based), Reuters via GV Wire, Yahoo Finance
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