Weekly Market Commentary: Small Cap Stocks Lead Peers Early in 2026

Sunflower Bank Weekly Market Commentary: January 20, 2026

Each week, our Wealth Management team analyzes the U.S. stock market and bond market activity and news of the previous week, summarizing their findings into a weekly market update report. The key points of this week's commentary, "Small Cap Stocks Lead Peers Early in 2026," include:

• Most large cap equity benchmarks ended the week lower, while small cap stocks, as measured by the Russell 2000, continued their strong start to the year. The S&P 500 declined -0.4% and the Nasdaq 100 fell -0.9% while the Russell 2000 increased +2.1% last week and is up +8.0% already this calendar year. For reference, the S&P 500 is up just 1.4% year-to-date. 
• The year-to-date outperformance of small cap stocks is surprising given recent history – the Russell 2000 has not outperformed the S&P 500 in a calendar year since 2020. Over the five-year period ended 12/31/2025, the small cap benchmark returned just +34%, or +6% annualized, as compared to the S&P 500’s return of +96%, or +14% per year. While extrapolating broader conclusions from a short time period can be a perilous endeavor, improved market breadth is a generally a good sign for continued positive equity market returns. Strong market breadth implies strength across many sectors of the economy, which is a more stable economic environment than an economy being driven by a few areas.
• Focusing on the economy, last week’s data releases included the December CPI and PPI for October and November. The two measures of inflation gave mixed signals. CPI rose less than expected, while PPI increased more than expected and prior month data was revised higher.

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