A surprising trend over the past year has been the performance of small-cap value stocks compared to the broader market, outperforming the S&P 500 by 13%. Typically, these companies are not very attractive to investors because of their size and moderate growth. While semiconductors and other growth companies continue to dominate the market, why have small value stocks been so appealing?
In our view, these smaller companies can provide a measure of insulation from recent market volatility — a quality that has drawn investor interest in recent months. Unlike the large, fast-growing companies that dominate headlines and attract heavy attention from institutional managers and the public, small-cap value stocks have largely stayed under the radar.
This stability is visible in AVUV, the small-cap value ETF we track closely. On the chart, the two blue bands show the expected price range based on volatility around the 20-day moving average. When markets become more turbulent, the bands widen to reflect greater uncertainty. Their recent tight “hug” around the price action signals a period of lower volatility and more predictable behavior.
The RSI reinforces this picture. It has remained comfortably in bullish territory since May, indicating sustained positive momentum rather than overbought exhaustion.
Looking ahead, it is still uncertain whether small-cap value will continue to outperform the S&P 500. However, if recent volatility continues to push investors toward less crowded and more stable segments of the market, small-cap value could remain well-positioned.
This stability is visible in AVUV, the small-cap value ETF we track closely. On the chart, the two blue bands show the expected price range based on volatility around the 20-day moving average. When markets become more turbulent, the bands widen to reflect greater uncertainty. Their recent tight “hug” around the price action signals a period of lower volatility and more predictable behavior.
The RSI reinforces this picture. It has remained comfortably in bullish territory since May, indicating sustained positive momentum rather than overbought exhaustion.
Looking ahead, it is still uncertain whether small-cap value will continue to outperform the S&P 500. However, if recent volatility continues to push investors toward less crowded and more stable segments of the market, small-cap value could remain well-positioned.
