Market Overview

Why Large Caps Have Done Better Than Small Caps

Why Large Caps Have Done Better Than Small Caps

Since its debut in 1979, the Russell 2000 index of small-cap companies has broadly kept pace with both the Russell 1000 and S&P 500 indices of larger and mid-cap stocks (Figures 1 and 2). However, while small and large-cap companies have delivered similar overall performances over the past four decades, there have been periods of significant variations, including in the first four months of 2020 when small-caps stocks underperformed large-cap companies by nearly 15%.

Figure 1: The S&P 500® and Russell 2000 have delivered similar performances since 1979


Figure 2: Russell 1000 and Russell 2000 have had similar overall performances over 41 years


Prior to 2020, small-cap stocks often outperformed during periods of economic distress (Figure 3):

  • 1979-82: During a period of high inflation, significant swings in interest rates and a double-dip recession that took unemployment from 5.5% to 10.8%, the Russell 2000 fared better than the S&P 500 by 76%.
  • 1990-93: Russell 2000 did better than S&P 500 by 48% during a period of economic recession and subsequent slow recovery associated with the Savings & Loan crisis and the Persian Gulf War
  • 1999-2013: Russell 2000 rose by 114% with respect to S&P 500 during a period that featured the ‘tech wreck’ recession of 2001, 9/11, two wars, the global financial crisis and a rather slow economic recovery.  There were periodic interruptions in small-cap stocks’ strong  performance, especially from 2005 to 2007 when the 2003-07 economic expansion reached it peak.   

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