iShares Russell 2000 ETF

IWM

Market cap $76.6B

Small-cap stocks have trailed large caps for 15 years -- an historical anomaly. Eras of small-cap and large-cap outperformance generally last 6 to 16 years.

5 ETFs to buy in January: momentum, small caps, chips, defense and healthcare shine as markets rally early in 2026 -- IWM, MTUM, SMH, XAR and IHE.

Bill Baruch, founder and president of Blue Line Capital, joins CNBC's “Halftime Report” to detail his latest portfolio move in the IJR.

Todd Rosenbluth, head of research at VettaFi, joined host Nate Geraci this week on ETF Prime to preview five key ETF stories to watch in 2026 following a record year that saw nearly $1.5 trillion in net inflows.

Small caps jump early in 2026, reviving the January Effect. ETFs like VTWO offer diversified exposure to potential seasonal and macro-driven gains.

SPY tracks large-cap U.S. stocks and has delivered higher recent returns than IWM, which focuses on small-cap stocks. IWM exhibits greater volatility and a deeper five-year drawdown, whereas SPY offers smoother risk-adjusted performance.

S&P 500 momentum and retail inflows set the stage for a potential 2026 rally, with ETFs offering ways to ride the bullish trend.

The Proshares Russell 2000 High Income ETF targets higher yields via a covered call strategy on small-cap equities. I compare ITWO to the iShares Russell 2000 ETF, which tracks the Russell 2000 Index and offers modest yield and growth exposure. ITWO's distributions are tied to option premiums, but recent payouts have been inconsistent, complicating yield predictability.

The Russell 2000 Index and the IWM ETFs jumped by 13% this year as global stocks continued their uptrend. It has now risen by over 25% in the last five years, underperforming other blue-chip indices like the Dow Jones and the Nasdaq 100.

I favor iShares Core S&P Small-Cap ETF as a long-term buy due to its embedded quality filter and lower expense ratio. I rate iShares Russell 2000 ETF a hold, as its recent outperformance is driven by speculative, unprofitable companies unlikely to sustain momentum. IJR's focus on profitable financials and industrials, lower volatility, and higher yield make it a superior core allocation for small-cap exposure.