$3B Flows into This Russell 2000 ETF — Could a Small-Cap Rally Be Coming in 2026?

Significant Inflows into Small Cap ETF: The iShares Russell 2000 ETF (IWM) experienced a remarkable inflow of $2.78 billion during the Thanksgiving week, contributing to a total of $3.7 billion added to its assets under management in November, indicating a strategic shift among investors towards small caps.

Market Dynamics and Investor Sentiment: The inflow into IWM suggests a growing conviction that small caps may outperform as expectations for rate cuts strengthen and inflation eases, especially as larger tech-focused ETFs like Invesco QQQ Trust (QQQ) faced notable outflows.

Potential for Small Cap ETFs: Other ETFs, such as the Vanguard Small-Cap ETF (VB) and Avantis U.S. Small Cap Value ETF (AVUV), are highlighted as potential vehicles for investors looking to capitalize on the anticipated resurgence of small caps, each catering to different investment strategies.

Broader Market Implications: The sudden interest in small caps may signal a shift in investor focus from mega-cap stocks to more diversified opportunities, suggesting that market participants are preparing for a potential leadership change in the equity landscape as financial conditions stabilize.