##  [# Small Caps Are Off to a Fast Start in 2026. Can It Last?](/sections/features/small-caps-are-fast-start-2026-can-it-last) 

 

# Small Caps Are Off to a Fast Start in 2026. Can It Last?

 

 

A pullback in big tech has opened the door for small-cap stocks to outperform early this year.



 

 

 

 

 [![sumit](/sites/default/files/styles/author_image_icon/public/2023-03/Sumit_0.png?itok=SO-7S5SH "sumit")](/authors/sumit-roy) 

[By Sumit Roy ](/authors/sumit-roy)

 Feb 05, 2026

 Edited by: ETF.com Staff

 

 

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Small-cap ETFs are kicking off 2026 on a strong note, but the long-underperforming corner of the market still has a lot of ground to make up.  
  
A sharp selloff in large-cap stocks this year, led by tech, has opened the door for smaller companies to finally take the lead. The [**iShares Core S&amp;P Small-Cap ETF (IJR)**](/ijr) is up 7.3% year-to-date, sharply outperforming the fractional loss for the [**iShares Core S&amp;P 500 ETF (IVV)**](/ivv).  
  
![](/sites/default/files/inline-images/ivv-ijr.png)  
  
If that gap were to hold, it would mark the biggest outperformance by IJR versus IVV since 2016, when small-cap stocks surged 26.6% compared with a 12.2% gain for large caps.  
  
That surge ultimately proved fleeting. In the nine years that followed, small caps beat large caps on an annual basis just once, in 2022, when both markets fell. IJR dropped 16.2% that year, slightly less than IVV’s 18.2% decline.  
  
Large caps have dominated largely because of Big Tech’s rapid rise, but the divergence isn’t just about growth. Over the past decade, earnings for the S&amp;P 500 have risen about 125%, compared with roughly 153% for the S&amp;P SmallCap 600, which IJR tracks.  
  
But while small-cap earnings have grown more over the past ten years, they have been far lumpier. From 2021 through 2025, earnings for the S&amp;P 600 were essentially flat, while S&amp;P 500 earnings climbed more than 30%.  
  
The consistency may help explain why investors have been willing to pay up for large caps. Since the start of 2016, the S&amp;P 500’s trailing 12-month price-to-earnings ratio has risen from roughly 16x to about 25.5x, while the S&amp;P 600’s multiple has remained closer to 18x.   
  
On a forward basis, small caps today trade near 15x earnings versus roughly 22x for large caps.  
  
Small-cap bulls see that gap as an opportunity. Despite more volatile earnings, they argue that long-term growth has kept pace, leaving valuations meaningfully cheaper today.  
  
Bears counter that small-cap earnings have gone nowhere for four years, while technology remains the market’s dominant growth engine, one where small caps are structurally underexposed.



 

 

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 [ Sumit Roy Senior ETF Analyst ](/authors/sumit-roy) 

 

 

  Sumit Roy is the senior ETF analyst for etf.com and author of (Don't) Invest Like a Pro. He creates a variety of content for the platform, including…   [View Bio](/authors/sumit-roy)

 



 

 


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