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Small Caps Notch Longest Win Streak Over S&P 500 Since 1996

(Bloomberg) -- Small-capitalization stocks have outperformed their bigger peers every day this year.

The Russell 2000 Index beat the broader S&P 500 Index for the 14th straight session on Thursday, with the benchmark setting its longest stretch of wins over large caps since May 1996, when the dot-com boom was in its early days.

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The small-cap gauge closed higher on Thursday, notching its eighth record close of 2026.

“Goldman Sachs’ forecasts point to accelerating and above-consensus US economic growth alongside below-consensus inflation and continued Fed easing,” Goldman’s Matthew Kaplan wrote in a note published on Thursday. “We do not believe markets are fully pricing the likely strength of the US economy next year, and small-caps typically outperform during cyclical rallies.”

What Bloomberg Strategists Say

“Despite signs of stabilization in the labor market and broader economic improvement, growth remains fragile. The burden now sits with small caps to show that the swift rally is justified by earnings that can carry the index to new highs which keep performance ahead of the AI-fueled S&P 500.”

—Tatiana Darie, Macro Strategist, Markets Live. For the full analysis, click here.

The Russell 2000’s outperformance has come at a time when enthusiasm over artificial intelligence is waning. Mounting concerns over companies’ ballooning costs and unproven profitability has led traders to look elsewhere for growth. As tech stocks lag, small caps benefit.

“There is a clear shift in leadership underway, and while there will be pullbacks, we want to stick on the side of this new trend which is still in its early days, in our view,” said Jonathan Krinsky, chief market technician at BTIG.

--With assistance from Natalia Kniazhevich.

(Updates for market close throughout.)