Our chart of the week looks at historical returns of U.S. small cap stocks as measured by a popular index for the space, the Russell 2000. Small caps stocks have started 2026 strong, and have quietly outperformed their large caps peers by a meaningful margin since the “Liberation Day” lows in April 2025. The long-term average annual return of U.S. small cap stocks is a respectable 12%, though similar to large caps it’s rare to see a year produce “average” returns. In fact, small cap stocks have only finished a calendar year within the 9-14% return range an astonishing two times. Another notable fact is that these two times happened to be the past two years, 2024 and 2025. The takeaway is that investing in small cap companies often come with heightened volatility – the good years are often very good while the bad years can be quite challenging.