Small-cap ETFs have outperformed the S&P 500 so far in 2026, with the iShares Russell 2000 ETF IWM gaining nearly 19% and the State Street SPDR Portfolio S&P 600 Small Cap ETF SPSM adding about 17.4%, compared to a 7.4% gain for the State Street SPDR S&P 500 ETF Trust SPY as of June 24. The rally has been supported by a stronger U.S. dollar, as the Invesco DB US Dollar Index Bullish Fund UUP is up about 5% this year amid the U.S.-Iran crisis, benefiting domestically focused small-cap companies. However, headwinds include a decline in the NFIB Small Business Optimism Index to 95.3 in May, the lowest since October 2024, and a Federal Reserve downgrade of GDP growth expectations to 2.2% from 2.4%. Valuation concerns also loom, with the Russell 2000 trading at a price-to-earnings ratio of 38.42, a premium to both the Nasdaq 100 at 34.47 and the S&P 500 at 25.18. On the positive side, hopes for a U.S.-Iran deal that could lower energy prices and strong earnings growth momentum for the S&P 600, with second-quarter earnings expected to rise 10.1%, may provide support, though the overall outlook remains bumpy given already-rich valuations and year-to-date gains.
State Street CorpArticle discusses small-cap ETF performance and macroeconomic factors like dollar strength and Fed GDP downgrade, but State Street is only mentioned as issuer of ETFs, not as a company with direct impact.