Story perspectives

Small-Cap Stocks Poised for 10% Annual Outperformance

5/22/2025

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Summary

Story summary

Research Affiliates forecasts a robust decade for small-cap stocks due to low valuations relative to larger counterparts.
The current valuation gap mirrors levels from the dot-com bubble and Great Recession.
Small-cap stocks may outperform large-cap indices by 4% annually, fueled by mean reversion.
Consider funds like Schwab Fundamental US Small Company ETF for small-cap exposure.
Small caps could lead innovation as larger firms decline, despite increased volatility.

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Story summary

Research Affiliates forecasts a robust decade for small-cap stocks due to low valuations relative to larger counterparts.
The current valuation gap mirrors levels from the dot-com bubble and Great Recession.
Small-cap stocks may outperform large-cap indices by 4% annually, fueled by mean reversion.
Consider funds like Schwab Fundamental US Small Company ETF for small-cap exposure.
Small caps could lead innovation as larger firms decline, despite increased volatility.