Small-Cap Stocks Have Been Waiting Years for Their Moment. Is It Finally Here?

Small-cap stocks have lagged the S&P 500 for much of the past 15 years, but 2026 is showing early signs of a reversal, with two ETFs cited as evidence. The Vanguard Small-Cap ETF (VB) is up about 6% year to date and is outperforming the Vanguard S&P 500 ETF by that margin. The article notes similar small-cap rallies have previously fizzled within six months to a year, so sustainability is the main question. It argues the AI boom has shifted investors toward valuations and tangible results, benefiting value-tilted small caps. The Vanguard Small-Cap ETF trades at a forward P/E of 17 versus 20 for the S&P 500 ETF. Earnings growth is expected to accelerate to 18% in 2026 and again in 2027. Interest rates are flagged as the key risk, since small caps rely more on debt.