How Small-Cap ETFs Are Beating the S&P 500 in a Rate Pause

The Russell 2000 has dropped 2.6% in the past five days, but small-cap ETFs are quietly outperforming large-cap indexes year-to-date in 2026. Lucas and Luna dig into why: the Fed holding rates at 3.65% on interest on reserve balances, a hot jobs report pushing rate cuts further out, and the rotation into domestic cyclicals. They compare the iShares Russell 2000 ETF (IWM) against the Vanguard Small-Cap Value ETF (VBR) and the SPDR S&P 600 Small Cap ETF (SLY), showing how value-oriented small-caps have gained 8% more than the S&P 500 since January. The hosts discuss how smaller companies benefit from a steady-rate environment—less debt exposure, more pricing power—and why the sector ETF flows are reflecting a 'buy American' trade. They also touch on the risk: small-caps are more volatile, and a surprise Fed hike could reverse the trend. No generic advice, just the data and the reasoning. #SmallCapETFs #Russell2000 #IWMeTF #VBRETF #SLYETF #FedRatePause #SectorRotation #ValueStocks #DomesticCyclicals #ETFInvesting #Finance #InvestingStrategy #MarketRotation #June2026 #FexingoBusiness #BusinessPodcast #ETFShow #MoneyTalks Keep every episode free: buymeacoffee.com/fexingo