These ETFs Handily Outperformed the S&P 500 in January, and They're Just Getting Started

After 3 years of outstanding gains, the S&P 500 started disconnected beardown successful 2026 arsenic well. The scale climbed different 1.4% successful January, contempt experiencing a spot of volatility related to President Donald Trump's imaginable commercialized policies.

But a brace of exchange-traded funds (ETFs) handily outperformed that effect successful January, and that inclination could proceed passim 2026 and beyond. Several catalysts could enactment the maturation of smaller companies with little value (or nary beingness astatine all) successful the S&P 500 index, and these 2 ETFs contiguous large ways for investors to instrumentality vantage of the trend.

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While the S&P 500 climbed 1.4% successful January, the Invesco S&P 500 Equal Weight ETF (NYSEMKT: RSP) climbed 3.4%. Even much awesome was the iShares Russell 2000 ETF (NYSEMKT: IWM), which climbed 5.5% past month.

Both ETFs are a mode to put much successful smaller stocks. The S&P 500 Equal Weight ETF invests an adjacent magnitude into each constituent of the S&P 500 alternatively of weighting its concern by marketplace cap. It rebalances quarterly. The Russell 2000 ETF tracks the benchmark small-cap banal index, which represents the 2000 smallest companies successful the marketplace weighted by marketplace cap.

Zooming out, some person importantly lagged the large-cap scale implicit the past 3 years. While the S&P 500 has been led higher by a fistful of megacap artificial quality stocks, overmuch of the remainder of the stocks successful the marketplace person been near behind. As a result, the S&P 500 has reached grounds levels of concentration, with the apical 10 constituents accounting for 41% of the index's worth arsenic of the extremity of the year.

But the inclination could beryllium astir to reverse, which means some small-caps and the equal-weight scale would proceed to outperform. Here's wherefore investors should see some ETFs for their portfolio.

There are a mates of macroeconomic factors that should payment smaller companies comparative to the tech giants that presently predominate the S&P 500.

First and foremost, we're astir to thigh the interaction of past year's tariffs. President Donald Trump raised tariff rates to the highest level since 1932 past year. That had a important interaction connected companies that trust connected overseas manufacturing, but don't rather person the heft to negociate peculiar attraction from the enforcement branch. In different words, practically each concern but the biggest of the big. As we thigh the interaction of tariffs, resetting net maturation expectations, smaller companies should spot amended guardant maturation expectations.