Name: ETF Edge on what's led to the historic bounce of small cap ETFs
Uploaded: 2026-07-13T22:58:34+00:00
Duration: 1281 s

Speakers

Matt Bartolini — Global Head of Research Strategist, State Street Investment Management

Phil McInnis — Chief Investment Strategist, Avantis Investors by American Century Investments

Summary

CNBC's ETF Edge discusses the historic bounce in small cap ETFs, with the Russell 2000 outperforming the S&P 500. Matt Bartolini highlights the rally's sustainable breadth and fundamental support, while Phil McInnis touts Avantis active small cap value ETFs for their alpha and low fees. Additionally, SPYM's selection as a default investment for Trump accounts reflects the shift toward low-cost, long-term holdings.

Russell 2000 outperforming S&P 500 year-to-date.
Matt Bartolini notes all 11 small cap sectors are outperforming large cap, a breadth signal not seen in over 30 years.
The rally is not a short squeeze; higher-quality, less-shorted small cap stocks are leading.
Earnings upgrade-to-downgrade ratio is favorable, supporting strong EPS growth for small caps.
Phil McInnis highlights Avantis active ETFs AVUV (US small cap value) and ABDV (non-US developed small cap value) with strong track records.
These active ETFs combine low fees, broad diversification, and a daily discipline focused on profitability and valuations.
SPYM has been selected as the default investment for the new Trump accounts, emphasizing low-cost, long-term asset ownership.
The ETF industry as a whole is on pace for over $2.3 trillion in inflows in 2026, led by active and low-cost products.

Ideas

Matt Bartolini Global Head of Research Strategist, State Street Investment Management 1:02

Small cap rally is sustainable.

Small cap rally is sustainable because all 11 small cap sectors are outperforming their large cap counterparts for the first time in over 30 years, indicating breadth. The rally is not a short squeeze—less heavily shorted small cap stocks are outperforming heavily shorted ones. Earnings fundamentals are strong: a 1.5:1 upgrade-to-downgrade ratio, higher EPS estimates for Q3, Q4, and full year 2026, and likely over 20% EPS growth this quarter. Macro support includes six months of manufacturing expansion and strong consumer spending boosted by the World Cup and America 250.

Phil McInnis Chief Investment Strategist, Avantis Investors by American Century Investments 3:08

Active small-cap value ETFs outperform.

Active small cap value ETFs like AVUV (US) and ABDV (non-US developed) combine broad diversification, low turnover, low management fees, and daily active oversight with a focus on profitability and quality balance sheets. This approach has delivered more than 300 basis points of annualized excess performance over category averages across the five Avantis ETFs launched since 2019, while charging only about 10 bps more than the asset-weighted category average fee. Investors are still overlooking small caps, and these ETFs provide a way to capture the asset class with a built-in valuation and quality edge.

Matt Bartolini Global Head of Research Strategist, State Street Investment Management 15:59

SPYM default in Trump accounts.

SPYM has been selected as the default investment in the new Trump accounts, reinforcing the secular trend toward low-cost ETFs and the principle of staying invested long term. This designation is likely to drive structural inflows into SPYM.

ETF Edge on what's led to the historic bounce of small cap ETFs

Summary

Ideas

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