Small caps have done well all the way off 2025 lows.... but participation within the group is even more narrow than large cap options. We analyze this today.
Small caps have improved as we have moved to the back few months of the year. Representative IWM now earns a 4.17 fund score (as of 11/10/25), outpacing the average US fund by roughly a quarter of a point. Despite this, small caps are no stranger to headfakes. Over the last few years, IWM has bounced up and around the technically acceptable 3.0 fund score threshold several times, each time slipping back down into unfavorable territory. Said more plainly, those market participants looking to jump the gun on small cap strength have not been rewarded over the last three years during the outstanding bull market large & mega cap stocks have ushered in. There are some interesting items worth noting despite this… including the somewhat recent return into X’s for IWM on its 3.25% RS chart against the “average” S&P 500 stock in September… but it maintains its near & long-term weakness against the cap-weighted S&P 500 as we move through November.
Just like large and mega-cap names, it can be useful to know where exactly the strength is, especially in a small cap space that is no stranger to large moves in either direction. Remember, knowing where to focus overall allocation is a major step in any investment process- knowing that small caps have improved but blindly selection the wrong sector (or poor attribute stocks for example) can create a drag on overall performance. For that reason, we created the table below which separates each sector into their small (Invesco suite) and large cap (SPDR select suite) options. Interestingly enough, there are only two sectors where the small cap option outpaces their large cap counterpart (technology and basic materials.) Furthermore, there are only 2 sectors (industrials and technology that currently hold technically acceptable fund scores by NDW standards. Point being, market participants who are looking to pick up small cap exposure have a better chance than not of selecting a sector with a weak technical outlook. Of course, weak sectors can have strong stocks (and vice versa) but using this high level view can help save you time as you start your security selection process.
There are dozens (if not hundreds) of places you could look around the platform for investment ideas. Whether it be in a strong or weak sector, one spot you could consider visiting first is the NDW buy lists, which break down technically strong stocks into different sectors. The main page (and therefore most traveled for most of you) will be large cap options, but just a click away is a small cap buy list that sheds light onto several different technically strong options within the small cap space. Outside of simple small cap options, we also break down different lists that have specific yield or low volatility options to allow you to drill down further to fit your clients’ needs. To discuss any specific questions in more detail, feel free to reach out to the analyst team.
