Is the Small-Cap Rebound Here? 3 ETFs Set to Surge 45% by 2028

Published: Friday, February 6, 2026 at 11:50 am

Small-Cap Stocks Poised for a Potential Rebound

Recent market trends suggest a potential shift in investor focus, with small-cap stocks possibly poised for a resurgence after years of underperformance. The Russell 2000 index, a key benchmark for small-cap stocks, has lagged behind the S&P 500 for most of the last seven years, with the exception of a brief period in 2020. However, historical patterns indicate that extended periods of small-cap underperformance are often followed by a period of recovery.

Analysts are suggesting that the current market environment may be ripe for a rotation into small-cap stocks. This is based on the expectation that the dominance of U.S. mega-cap growth and tech stocks, which has defined the market for the past three years, may be nearing an end. The potential for an artificial intelligence (AI) boom to continue this trend is being weighed against historical data, which suggests that small-cap stocks are overdue for a period of outperformance.

The potential for a significant rebound is being discussed, with some analysts predicting a 45% surge in small-cap ETFs by 2028. This projection translates to an average annual return of approximately 13%, a figure considered reasonable given the value currently built into this market segment and the early stages of a potential investor rotation. This forecast is supported by historical data, with the index having experienced similar returns during past three-year recovery cycles.

Several ETFs are highlighted as potential beneficiaries of this trend. The iShares Russell 2000 ETF is a common representation of the small-cap market, but it includes a significant number of unprofitable companies. The iShares Core S&P Small-Cap ETF offers a quality-focused alternative, tracking an index that requires positive earnings. The Vanguard Small-Cap Value ETF is also presented as an option for investors seeking exposure to undervalued companies.

BNN's Perspective: While the potential for a small-cap rebound is intriguing, investors should proceed with caution. The market's historical patterns are not always indicative of future performance. The higher risk profile of some small-cap stocks, particularly those with lower profitability, warrants careful consideration. Diversification and a thorough understanding of the underlying holdings of any ETF are crucial before making investment decisions.

Keywords: small-cap stocks, ETFs, Russell 2000, S&P 500, iShares Russell 2000 ETF, iShares Core S&P Small-Cap ETF, Vanguard Small-Cap Value ETF, market rebound, investment, finance, stocks, market analysis, financial news

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