While the Russell 2000 outperformed the S&P 500 through much of the first half of 2026, small caps have lagged their large-cap counterparts over much of the past several years. Three structural factors help explain this longer-term performance gap.
The first is sector composition. The S&P 500’s performance has been driven heavily by mega-cap technology companies and the buildout of artificial intelligence, with the Magnificent Seven playing a prominent role. The Russell 2000 has much less exposure to these themes and greater exposure to areas such as regional banks, industrials, and biotechnology, where economic and financing conditions can have a significant influence.
The second is profitability. A notable share of Russell 2000 constituents, roughly 40% by some estimates, remain unprofitable. Many are early-stage biotechnology and technology firms. Investors have historically favoured the more visible, higher-margin earnings of S&P 500 companies over the less established earnings potential of smaller companies.
The third is sensitivity to interest rates. Smaller companies tend to carry heavier debt loads relative to their size. Around 40% of Russell 2000 debt is floating-rate or short-term, allowing higher interest rates to flow through to borrowing costs more quickly. Many of the largest S&P 500 constituents hold substantial cash reserves and secured long-term financing at lower fixed rates, helping insulate them from rising borrowing costs.
These differences help explain the recent shift in leadership. Earlier in 2026, the Russell 2000 benefited from a rotation toward small caps as expectations for tighter monetary policy eased. That leadership faded as Treasury yields climbed to multi-decade highs and expectations for further Federal Reserve rate increases returned. By early October, the Russell 2000 had fallen behind the S&P 500 on a year-to-date basis.
In this edition of Equity Leaders Weekly, we examine the S&P 500 and Russell 2000 Index charts to assess their technical positioning and identify key support and resistance levels.
S&P 500 (SPX.I): Bullish Signal Supports Large-Cap Strength
The S&P 500 provides a broad view of large-cap US equities, tracking approximately 500 leading companies across all eleven industries. Its market-capitalization weighting gives the largest constituents, including mega-cap technology firms, a significant influence on performance. As a result, index returns can differ meaningfully from those of the average constituent, reflecting both broader market conditions and the earnings and valuations of its largest companies.
The attached Point & Figure chart shows an SMAX score of 9 out of 10, indicating strength relative to other asset classes. The most recent chart signal is a Bullish Double Top, and the index is currently in a column of X’s. Initial resistance is identified at 8,270.69, followed by 8,952.46. On the downside, initial support is at 7,200.13, with further support at 6,920.54 and 6,268.15.
Russell 2000 (RLS.I): Small-Cap Strength Remains Mixed
The Russell 2000 provides a broad view of small-cap US equities, tracking approximately 2,000 smaller publicly traded companies. Like the S&P 500, it is weighted by market capitalization, but its broader constituent base limits the influence of any single company. Performance is sensitive to company earnings, financing conditions, and the domestic economy, and returns can be more volatile than those of large-cap indexes.
The attached Point & Figure chart shows an SMAX score of 5 out of 10, indicating a more mixed picture of strength relative to other asset classes. Initial support is identified at 2,684.14, followed by 2,479.73. On the upside, initial resistance is at the three-box reversal level of 2,963.51. Further resistance lies at the previous all-time high of 3,083.23, followed by 3,337.39.
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