Even with Wall Street rallying off April lows, small-cap stocks remain stuck in the mud, with the Russell 2000 still trading near its lowest level relative to the S&P 500 since December 2000.
The ratio between iShares Russell 2000 ETF (NYSE:IWM) and SPDR S&P 500 ETF Trust (NYSE:SPY) continued to hover around levels last seen 24 years ago, a clear sign of investor preference for large, multinational firms amid ongoing macro volatility.
Chart: Small Caps Have Never Been This Cheap Relative To Large Caps In A Quarter Of A Century
Why Small Caps Lag Behind
Small companies have consistently trailed large-cap peers throughout 2025, and analyst Michael Gayed, CFA, said there’s a clear reason: “These companies are likely to be more negatively impacted by tariffs because of …