Investing Ideas

The case for owning small cap stocks

Why a combination of valuation and improved earnings have changed the outlook for this differentiated asset class.

By: Forrest St. Clair Benjamin Treacy

Updated: 4/27/2026

Key Takeaways

Since 1929, the performance of large cap U.S. stocks versus small caps has run in cycles lasting about seven years, on average, making the current cycle of U.S. large cap outperformance an outlier.
What’s changed for small caps vs. recent years includes expectations for improved sales and better earnings.
Meanwhile, relative valuations (U.S. small caps vs. large caps) are in their cheapest quintile since 1990, which has increased the historical odds of small caps outperforming large caps over the next 5 to 10 years.

Get the full white paper

The case for owning small cap stocks

Next steps to consider

Domestic equity

Target your clients' investment needs with our broad lineup of domestic equity solutions.

Learn more

Active equity ETFs

Unlock unique investment opportunities and construct a stronger core with our industry-leading approach to active ETFs.

Learn more

Quantitative Investing

Find out how a blend of human insight, data, and technology can help uncover opportunity for your clients.

Learn more

For important information, see the full linked content.

1211563.2

570024D8252C4FCB80E8E014C7EE3AB5

Past performance is no guarantee of future results.

Unless otherwise expressly disclosed to you in writing, the information provided in this material is for educational purposes only. Any viewpoints expressed by Fidelity are not intended to be used as a primary basis for your investment decisions and are based on facts and circumstances at the point in time they are made and are not particular to you. Accordingly, nothing in this material constitutes impartial investment advice or advice in a fiduciary capacity, as defined or under the Employee Retirement Income Security Act of 1974 or the Internal Revenue Code of 1986, both as amended. Fidelity and its representatives may have a conflict of interest in the products or services mentioned in this material because they have a financial interest in the products or services and may receive compensation, directly or indirectly, in connection with the management, distribution, and/or servicing of these products or services, including Fidelity funds, certain third-party funds and products, and certain investment services. Before making any investment decisions, you should take into account all of the particular facts and circumstances of your or your client's individual situation and reach out to an investment professional, if applicable.

Registered investment products (including mutual funds and ETFs) and collective investment trusts managed by Fidelity Management & Research Company LLC (FMR Co.) and Fidelity Management Trust Company (FMTC), respectively, are offered by Fidelity Distributors Company LLC (FDC LLC), a registered broker-dealer. Investment advisory products and services are provided by FIAM LLC, or Fidelity Diversifying Solutions LLC (FDS), both U.S. registered investment advisers. FDS is also a CFTC registered commodity pool operator and registered commodity trading adviser. Products and services may be presented by FDC LLC, a non-exclusive financial intermediary affiliated with FIAM and FDS and compensated for such services. FMR Co. is a U.S. registered investment adviser. FMR Co. is adviser to the Fidelity family of mutual funds and ETFs.

Before investing have your client consider the funds', variable investment products', exchange-traded products', or 529 Plans' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or a summary prospectus, if available, or offering statement containing this information. Have your client read it carefully.

The use of the term "advisor(s)" throughout this site shall refer to both investment advisors and broker dealers as a collective term.