As the end of the second quarter nears, small caps have led U.S. equities through the month of June with the Russell 2000 Index ([RUT]) gaining over 3% (5/29 – 6/25), rallying to new all-time chart highs at 3,020 during Thursday’s trading session.
As the end of the second quarter nears, small caps have led U.S. equities through the month of June with the Russell 2000 Index (RUT) gaining over 3% (5/29 – 6/25), rallying to new all-time chart highs at 3,020 during Thursday’s trading session. Prior to rallying to highs Thursday, RUT gave a third buy signal on the default point and figure trend chart to kick off the week at 3,000. Compared to other U.S. equity indices, RUT has outpaced all others by more than 1% and the S&P 500 Index (SPX) by just shy of 6% in June. For the second quarter, RUT is up more than 20% through Thursday’s (6/25) close and lags only the Nasdaq-100 (NDX), up 24%, in terms of Q2 performance.
Signs of small caps’ intermediate-term leadership can be found on the Asset Class Group Scores page, which ranks 134 asset class groups by averaging the fund scores for ETFs and mutual funds within the specified asset group. Looking at the U.S. Styles View of the ACGS rankings reveals the three small cap style groups ranking above their large- and mid-cap counterparts— a position the groups have sustained for the better part of two weeks. As of Thursday’s close, all three small cap groups maintain a score of 4.48 or higher (out of 6), with each residing at their highest levels since early 2021.
The long-term NDW DALI Size and Style Rankings have also begun to see small cap groups climbing up the rankings, with the small cap growth group moving into the fifth position. This marks the first time since 2023 that any small cap group has moved into the top 5 (out of nine) of the long-term RS size and style rankings, and the first time since very early 2022 that small cap growth has ranked within the top 5.
Evaluating both the Asset Class Group Scores page and NDW DALI Size and Style Rankings highlights the positive trend and superior near-term strength shown within the small cap space. From a long-term perspective, while small caps have improved within the rankings, large cap groups have yet to be unseated from their long-term leadership position. Should small caps continue their recent leadership and move up the long-term DALI Size and Style Rankings and usurp large caps, it would mark the first time since 2021.
Examining the Invesco Small Cap sector lineup reveals that seven of the nine small cap sector ETFs are positive in the month of June, eight of the nine are positive in Q2, and all nine are positive on a year-to-date basis. During the second quarter, technology gained more than 40%, followed by healthcare, which saw a notable surge within the month of June and is now up more than 25% for the quarter. Along with the aforementioned two sectors, six additional small cap sector ETFs have seen double digit gains on a year-to-date basis – the lone exception is consumer discretionary, which is up 9.99% year-to-date (thru 6/25).
Those who may be seeking a solution to small caps exposure could consider the Invesco Small Cap Sector Model (POWERSMALL), which utilizes the nine small cap sector funds and holds the top three ranked sectors based on a relative strength matrix ranking. The model is evaluated weekly and witnessed a trade earlier this week, removing the Invesco S&P Small Cap Energy ETF (PSCE) and adding the Invesco S&P Small Cap Materials ETF (PSCM). In addition to materials exposure, the model has maintained exposure to the Invesco S&P Small Cap Information Technology ETF (PSCT) since November 2025 and the Invesco S&P Small Cap Industrials ETF (PSCI) since February 2023. Year-to-date, the Invesco Small Cap Model has gained over 28%, outperforming its benchmark, the S&P Small Cap 600 Index (SPSML), and the Russell 2000 Index (RUT) by more than 7%.
