Small-cap stocks are beginning to outperform again, but ETF investors remain overwhelmingly focused on mega-cap technology and AI trades — a disconnect some strategists believe could create an opportunity in overlooked parts of the market.
The debate resurfaced after Bloomberg Intelligence analyst Eric Balchunas posted on X that small caps have effectively become “Ignored Caps,” noting that small-cap ETFs once made up roughly 10% of ETF industry assets but now account for closer to 4%. At the same time, small-cap mutual funds have suffered around $25 billion in outflows even as the asset class starts regaining momentum.
The comments beneath the post reflected growing frustration that investors may be arriving late — again.
“By the time broader flows rotate back into ignored sectors, a lot of the real upside is already gone,” one user wrote, highlighting a view increasingly shared across factor-investing circles.
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This post was originally published here
