Prediction: This Small-Cap Value ETF Will Beat the S&P 500 Over the Next 10 Years
Recent stumbles from some of the market's biggest leading growth names suggest a shift may be brewing.
A new prediction suggests a small-cap value ETF may outperform the S&P 500 over the next decade. Most market gains since the 2022 bear market have been driven by large-cap stocks, with the S&P 500 up about 110% since the bull market began. Small-cap value stocks, however, have gained nearly 20%. The Russell 2000, which tracks small-cap stocks, is expected to outpace S&P 500 profits through 2026 and 2027.
Small-cap value stocks have also beaten the S&P 500's year-to-date gain of just over 12%. The forward-looking price-to-earnings ratio for the S&P 600 Small Cap Index is currently below its long-term average, while the S&P 500's cyclically adjusted price-to-earnings ratio is near a multi-decade high. Historically, large-cap and small-cap stocks trade market leadership positions an average of every seven years, with the last seven years belonging to large-cap stocks.
While it's uncertain if this trend will continue, the prediction suggests betting on the information available rather than attempting to predict the unpredictable.
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