Small-Caps Are Outpacing the S&P 500 in 2026. Here Are the Names Wall Street Is Betting On.

The Russell 2000 Is Having a Historic Run

The Russell 2000 closed at an all-time high of 3,033.75 on Thursday, June 25, according to CNBC. Up 21% in 2026, the small-cap index is on track for its best first half since 1991, and it's doing it while the S&P 500 is actually poised to close the week in the red.

Technology stocks dragged the S&P down this week. The Nasdaq extended a four-day slide through Thursday despite strong earnings from Micron Technology, which lifted chip names but couldn't rescue the broader tech complex. The contrast with small-caps is sharp.

What Bank of America and TD Cowen Are Watching

Bank of America analyst Jill Carey Hall told clients Thursday that the Russell 2000 has been "the best-performing size index" in the first half and that she still sees upside, particularly in less rate-sensitive small-caps, where gains have been concentrated.

TD Cowen has a buy rating on Freshpet, the refrigerated pet food company, with an $80 price target. Analyst Robert Moskow wrote in a June note that Freshpet holds just 2.7% volume share of the dog food category and remains "in the middle innings" of converting standard kibble buyers to its premium refrigerated format. The super-premium dog food segment is still growing at 7% to 10% annually, Moskow said, even as overall canine adoption rates have slipped. Freshpet's market cap currently sits at roughly $2.6 billion.

Both Bank of America and TD Cowen also flagged Omnicell, a healthcare technology company. Additional names on their combined lists include Baldwin Insurance, Agios Pharmaceuticals, and Shoals Technologies.

Rogers: AI Is a Bubble. Cheap Financials Are the Play.

John Rogers, chairman, co-CEO, and chief investment officer of Chicago-based Ariel Investments, made the case on CNBC's Power Lunch on Thursday that value investors have been punished by the AI trade, and that won't last forever.

"I think the broad, broad market is expensive, driven by the AI craze," Rogers said from the Cboe trading floor in Chicago. "I do think that the AI craze will end the same way things ended at the end of the century, when the internet bubble finally burst."

Rogers has been a value investor for decades, so his skepticism about momentum-driven trades is consistent with his record. Value managers have been calling bubbles in growth stocks for years, often too early, which is worth noting when assessing his warning.

His specific picks reflect that value framework. Rogers is bullish on Covista, a Chicago-based for-profit education company focused on training doctors and nurses. Shares are up 20% in 2026. He credited CEO Stephen Beard for getting the company on track and cited global healthcare worker shortages — specifically shortages of nurses and doctors — as a structural tailwind.

In financials, Rogers pointed to Lazard and Carlyle Group, down 16% and 29% respectively in 2026. He described Lazard as a premier investment bank with a money management arm and praised CEO Peter Orszag along with president Ray McGuire. On Carlyle, Rogers acknowledged the negative headlines surrounding private equity broadly but argued the stock has become cheap on a valuation basis. "These companies now are selling at 9, 10, 11 times next year's earnings," he said, framing that as an opportunity in a deregulated deal environment.

Rogers also pointed to electronics manufacturer Littelfuse and components producer Knowles as two other Chicago-based small-cap companies he currently owns. Both stocks have surged roughly 89% and 90% this year, respectively.

The Opposing Case Deserves a Hearing

Not everyone sees the small-cap surge as durable. The strongest counterargument is straightforward: small-caps are disproportionately exposed to a slowing domestic economy and higher-for-longer interest rates. Many Russell 2000 companies carry floating-rate debt, which means their borrowing costs stay elevated as long as the Fed holds rates. If the economy softens in the second half of 2026, smaller companies with thinner margins and less access to capital markets feel it first. Bank of America's Hall partially acknowledges this. Her recommendation to favor "less rate-sensitive" small-caps implies the rate-sensitive ones remain a real risk, not a solved problem.

For Covista specifically, the for-profit education sector carries regulatory tail risk. The current administration's posture may be permissive, but that can change with a future administration, and investors in the sector have been burned by policy reversals before.

The Unresolved Question

The week's divergence — AI-driven mega-caps selling off while small-caps hit all-time highs — raises a genuine allocation question that neither CNBC source fully answers: how much of the small-cap outperformance reflects a genuine fundamental rerating versus investors rotating out of overextended tech into anything that isn't tech? If it's mostly the latter, the small-cap rally could stall or reverse when tech stabilizes. Bank of America's Carey Hall said performance within the Russell 2000 has been "concentrated," meaning a handful of names are doing the heavy lifting, which suggests the broad index number flatters the actual breadth of the move. That concentration data point is the most important unresolved variable heading into the second half.