ETF Edge - Small caps, big moment 7/13/26

Episode Date: July 13, 2026

Small caps are outperforming YTD… by some measures breaking 30-year records. Can this trend last through 2026 and beyond?    Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

The ETF Edge podcast is sponsored by InvescoQQQ. Let's rethink possibility. Investco Distributors, Inc. Welcome to ETF Edge, the podcast. If you're looking to learn the latest insights on all things, exchange, traded funds, you're in the right place. Every week we're bringing you compelling interviews, thoughtful market analysis, and breaking down what it all means for investors.

I'm your host, Dominic Chu. Small cap stocks so far are having a big year in terms of outperformance. But can they keep it? that momentum going. Here's my conversation with Phil McKinness, chief investment strategist at Avantis investors, along with Matt Bartolini, the head of Spider-America's research at State Street Global Advisers. Let's set up the macro stage a little bit for this kind of short, at least short, dated story right now for small-cap outperformance. Is this something Matt Bartolini that we can expect to continue more medium to longer term, do the fundamental support?

that small-cap outperformance, especially since those March 30th lows during the Iran war. Yeah, I think there's a couple aspects to it. One is there's some stronger sort of relative momentum and depth and breadth associated with it. So you have all 11 small-cap gick sectors outperforming their respective large-cap gick sectors. That hasn't happened in over 30 years based on index data that goes back that far. So you have that relative case. You then also have this idea of that it's not a junk rally. So when you bifurcate the small-cap market, based on short interest. So heavily shorted stocks versus not so heavily shorted small cap stocks.

The not so heavily shorted ones are outperforming the heavily shorted. So if this was a sort of snapback junk rally where it was a short squeeze, it would be the inverse. So the fact that that's not there shows that there's depth, there's breath, and there's more of a sustainable rally to it that's also supported by some of the fundamental momentum where you see one and a half firm ratio of upgrade to downgrade ratios. So in terms of earnings, you're seeing more firms upgrade their earnings expectations, relative to downgrading it.

And that's led to higher earnings per share estimates, not just for full year 2026, but for Q3 and Q4. And this quarter is looking likely to be over 20% EPS growth as well. So you have that fundamental momentum, the relative price momentum, the idea that's more enduring, it's on a snapback rally. And then the macro landscape has been supportive. If you have manufacturing data, it's been an expansionary territory for the last six months, and you also have still strong consumption, which is getting a booth right now from the World Cup,

anecdotally, but also America 250, and that has been a benefit to the small cap market. Phil, there are many fundamental cases for why that small cap outperformance can continue. Does that what Matt just spoke to, does it kind of seem to concur or agree with some of the things that you're seeing from a small cap manager's standpoint? Are we seeing a little bit more of that fundamental broad-based positive narrative? for the small cap backdrop. And I think about things like, you know, profitable versus non-profitable type companies. How does that all kind of reconcile

with what you're seeing over at Vantas? Yeah, so at Avantus, we manage a couple of the largest small-cap ETFs in the world in terms of the active ones. And we've been doing it back since 2019. And I think that this, if folks are calling it a reversal, you know, small caps finally outperforming, finally doing well.

I think that some small caps have been looped in with others as far as getting maybe a bad rap because you've had such positive returns on the large cap side and some pretty significant multiple expansion in the large cap side if we look back over the last few years. So on a relative basis, you've actually seen small caps maybe being disappointing relative to large caps. But when we think about managing a small cap portfolio, something like AVUV, our US small cap value or ABDV, which is focused on non-US developed small caps. That intersection that you're talking about about profitability, but price point is really

where we live. So we're looking to get broad, diversified exposure. So as Matt's talking about the broadening in the market, more companies participating, we want to make sure we have exposure across all those sectors and to many, many individual companies. But as we're doing that, we've got to make sure we're taking care of what's the quality of that balance sheet, how good does that profitability look? and that intersection of that is really where we find value.

And if you look back, actually, we feel like small caps have done pretty well if you manage them the way we do over the last six and a half years or so. But it's nice to see small caps getting a little bit more attention. From a flow perspective, you know, ETF small cap flows look great in Q2. I still see large cap flows getting a lot more attention versus small caps if we broaden out and we look at ETFs and mutual funds together. So I still think small caps are maybe being overlooked by a lot of investors. And I think there's a massive reason to have them in your portfolio.

What exactly, can I follow up there, Phil? What exactly do you think gets investors to buy more wholesale into this idea that small mid-cap companies should have more of an allocation, be getting more attention, get more investment advisor interest, I guess, is the best way to put it. into allocating towards those parts of the market because we've had such muscle memory for the past decade and a half or so with regard to just being in that kind of safety of the large cap trade.

One thing for me, and it sounds really basic, but even going back to just sort of first principles of what is the market. I mean, when you talk to folks of how is the stock market doing, it's so frequent that you hear, well, here's what NASDAQ did, here's what the Dow did, here's what the S&P 500 did.

And I think if we zoom, out and we think about the global stock market, you know, I think about that as being, it's the US, it's non-US developed markets and it's emerging markets all together. And it's not just large caps, it's mid-caps and small caps. And I don't think maybe there are some investors that don't realize if you're buying the S&P 500, yes, that's giving you pretty decent exposure to the stock market, but it's nowhere close to the full stock market, the number of companies that are there and it's even smaller if we look at it on a global basis. So the first principle you can go back to do I have the market portfolio and my portfolio,

my participating, you know, emerging markets and other areas, it's done tremendously well if we look over the last year. A lot of folks were very scared about having emerging markets all in their portfolios. And so for us going back that first principle of the overall market, but I think the notion that you can have a broadening, you can have a lot of companies participating in this growth, those are hopefully things that investors are paying attention. You know, Matt, how much of this dynamic that Phil just mentioned with regard to kind of understanding what you're buying,

what you're allocated towards, your kind of total market exposure, how much of that has become more sophisticated and more nuanced at the same time because of the number and types of ETFs that are at market right now? There are so many options out there so that you can custom tailor portfolios on a very thematic or more specific basis. You don't have to just buy one specific fund that allocate you to everything. You have the ability to over and underweight

based upon what your views are. Do investors then have to take that into account because not every index is going to give you that broad market exposure? Do you have to be more customized in the way that you approach how you invest in terms of allocation? Yeah, that's sort of an interesting question

because it sort of bends both ways. The first thing is that you have seen a rise, of more democratized customization. So the ability to customize your portfolio for a specific need or outcome using a democratized vehicle like an ETF that everyone can trade in. But you can be very precise

in the amount of income generation you're getting or the amount of drawdown protection you may have through those more defined outcome strategies. And I think that sort of speaks to more of the traditional portfolio construction and three true outcomes of capital appreciation, income generation, and managing risk. But I think then you have a lot of these other ETF

on the marketplace that bend a little bit more towards thematics and become more niche and more granular. And what happens is that you're altering your risk profiles now maybe taking on single stock risk, taking on more derivatives risk, and being more concentrated in nature. And that actually sort of allows or requires investors to do far more due diligence of understanding what the role in a portfolio they can be, the amount of allocation you need for those. but then also what are the byproducts of negativity? So where could it go wrong? And what are the after-tax consequences as well?

So I think with all of these new ETFs coming to the marketplace, now they have over 5,000 ETFs, there's a lot of choice out there, but there's also a lot of complexity too. And with both more choice and more complexity, there needs to be more and greater due diligence and education and awareness of not just the positive role that these type of instruments can play in portfolios,

but also what are some of the negatives that could transpire based on market events because a lot of these times we're sort of looking at the most recent past that's sort of extrapolating it into the upcoming future. And as we all know, the most recent past heavily always unlikely looks like the more upcoming future. And I think taking broad strokes and zooming out, if you're using these ETFs, just try to think about those basic principles of how am I going to be able to seek that capital appreciation in a prudent manner, the income generation, and then managing the energy.

risks without really over-complicating or having sort of worse diversification or diversification of your portfolio by adding in too many things. All right. So it sounds like there's a lot of activity that goes along kind of investing these days because of the plethora of options out there. And that's maybe the reason why actively managed funds have now grown so much in terms of popularity. Phil, from an active management standpoint, what exactly?

are you seeing what are investors tuned more into these days with regard to active management when it comes to small caps? What are some of the factors that stand out the most to you? We had mentioned profitability versus non-profitability. We had mentioned things like short interest and relative degrees of that. What exactly from an actively managed standpoint in small caps seems to stand out most to you in terms of how people are actually approaching that small cap investing. It's not just about the Russell 2000 ETF anymore. Yeah, that's exactly right. And I think part of it actually connects back to some of what Matt said. And I couldn't agree more when you look at the choices that are out there for investors and the concept of how many options there are.

You know, as he said, over 5,000 ETFs. There's more than 6,500 or so mutual funds that are out there, too. So you've got a lot of choice. But when you look at ETFs, you look at the growth of active ETFs, more than a thousand were launched in in 2025. And I think that's causing folks to go back and re-underite some of their exposure. And I think that that's a really interesting piece because there's a lot of things that maybe got grandfathered in as an ETF because they tracked an index. And just because it tracks an index, then I know what I'm getting. And I frequently am in front of investors and talking about if we look at a specific asset class,

So, you know, AVU needs a small cap value, ETF actively managed. If we look across the different index based small cap value ETFs, so say something that's tracking the S&P 600 value or the Russell 2000 value or the crisp US small value, those all don't look the same. They all have pretty significant active share to one another. They have different levels of turnover. They have different times throughout the year at which they're rebalancing.

And that all leads to differences in performance. And so when we think about managing small cap strategies at Abatis, what would I like about more of an index-based approach, some of the principles that I like about it, it is transparent that you know what you own. It's low turnover, which helps from a tax efficiency perspective. The vehicle helps a lot, by the way, as well. It's something that's very broadly diversified and it's low cost. And when we think about those principles, those are principles that we want in our portfolio. So if you look at any Abatheus strategy, you're going to see low turnover. you're going to see broad diversification, you're going to see low management fees. And we like the idea of being able to participate in a broad number of companies. But with that said, if I'm managing something to have maybe zero tracking error to a specific definition of the asset class,

we feel like that daily oversight, a daily process is something that can give me the continuous exposure to the part of the market that I'm trying to target and use the most up-to-date information financials that we have. So things like profitability, which we already talked about, the quality underlying balance sheet, we also have to pay attention to things like momentum, right? So stocks typically aren't IPO in a small cap value stocks. They're coming into a universe because they're falling in price. And so we need to be able to manage things like momentum as we're building a portfolio.

But those characteristics of, if I can give you a lot of the same characteristics of an index-based fund, but with that daily active oversight, an emphasis on valuations, we think that that's a marriage that investors really, really appreciate and so far our clients have seemed to have been happy with it. Sure, Matt, I mean, it's a good point, right? This idea that you have to be a little bit more, I guess, attentive to some of the exposures that you have and maybe explore some of the things that you may not have exposure enough to.

From your standpoint, are you seeing trends develop right now within the broader ETF space outside of just say small caps, are there certain strategies that seem to be resonating a little bit more in this current market as we approach the back half of this year, as we are in the back half of this year? Are there places that are maybe getting a little bit more attention now relative to what they've gotten over the course of the past six to 12 months and maybe even largely so,

more attention to what they've gotten since really the COVID kind of pandemic era and investing in that market? Well, I think just more broadly, Actually, ETFs themselves have garnered far more interest than they had in the past couple of years. And some of that's driven by a few secular trends where, you know, we're anticipating the full U.S. listed ETF industry to have over $2.3 trillion of inflows in 2026. We're already above $1 trillion halfway through the year. So we were very confident in that estimate and expectation.

Those secular drivers, you know, we mentioned active. That is one of them. The rise of fixed income ETFs is another. And that is within that active construct, but it's also within low-cost ETFs. we're not going to get to $2.3 trillion without that continued momentum of building robust and diversified asset allocation mixes in owning assets while keeping expenses low. And we've seen low-cost ETFs take in roughly 50% of all inflow so far in 2020. We think that they will do themselves over $1 trillion, which the ETF market hadn't even

broken a trillion in an entirety in an entire year until 2023, 24 around that time frame. So now you have one aspect of it and low-cost ETFs really just driving high flow momentum. And I think it's just taking a step back and just thinking, you know, why low-cost ETFs is sort of those fundamental truths when thinking about portfolio construction. I talked about the asset allocation earlier. But a thing of it is assets historically own a premium over cash. So that means staying invested. Then timing the market is not as good as having time in the market. And I think even just recently when we saw the Trump accounts notice come out where spy.

M has been selected as the default investment, and it speaks to this idea of just owning assets, owning them for a long time, having that time in the market rather than timing the market, but also keeping expenses low. So whether it's the Trump accounts using SPI-M as that default option, or just the over 500 or so inflows into low cost as a segment, that is what's really driving some of the inflows and some of the record that we were also seeing beyond what we saw in active and fixed income, and then some of the tactical ones too, where we've seen sectors have a really strong flows this year as investors are playing a little bit more dispersion within the sector complex.

All right. And Phil, last question to you, amidst all of that, all of the variability, all of the different factors, the kinds of instruments that can be used, is there a feeling from your standpoint being at a small cap investment manager that provides ETF products, that this spread compression, the lowering of fees, the lowering of fees, the lower cost kind of paradigm, which is, by the way, been kind of part and parcel to ETFs for pretty much the entire life of the product, is there a feeling from your standpoint that the lower cost push and that kind of spread compression allows for certain investment advisors to create more alpha based upon the actual performance of the asset themselves X fees so that maybe

they become more sophisticated in the way that they construct their portfolios, because fees are not as much a portion that investors have to consider actively when they look at returns for the longer term? Yeah, the way I think about it is at the end of the day, all of us in this industry are serving that end investor, right? So even if we're working through, you know, an RIA or a wealth manager who has more knowledge of that specific client, their circumstances and what their portfolio should look like to help meet their goals, we're really big proponents of good financial advice here.

at a office. So when I think about that whole ecosystem, if they're using good, low-cost building blocks, then there's going to be a lower fee to that client. There's going to be more dollars kept in that client's pocket, and that's going to compound nicely over time. So I'm just as much of a believer in low fees as I think that is.

You know, for us, we obviously, we don't manage index funds. We manage active funds because we think we can do a little bit better. and if you look across our suite of strategies that we've been managing, you know, from a fee perspective, there's five ETFs that we've had up since 2019. And, you know, I pay very close attention to, say, the Morning Star Fund fee study and where the fees of active are and passive are. And if we look at it on an equal weighted basis or an asset weighted basis,

and so if you look at the average expense ratio of those five ETFs that we launched, you know, I think we're in the 26 basis point range. And if you look at the asset, asset weighted average across the Morning Star categories that those sit in, that's in around a 17 basis point range. So we're asking folks to pay maybe 10 basis points more on average. But we've been able to deliver thus far more than 300 basis points of annualized excess performance on average across those 5 ETF.

So that's what I'm talking about in terms of we think there's a middle ground of if you have good underlying systems, processes, and people to be able to take some of those components of index that make sense, take some of that daily active oversight, you've got a really powerful combination for allocators to be able to deploy. I think as an allocator, anytime you're making a decision to use, whether it's an active strategy, passive strategy, whatever else, using that active strategy, you introduce potential opportunity cost into the scenario of, oh, I just wanted the beta, and now this person picked the wrong stocks or held them at the wrong weights, and now I'm left holding on

bag. So we really try to manage that opportunity cost and that idea of making sure we do a good job of delivering that asset class. That's really jobs one and two, as I think about it for our portfolio manager. But we think we can do better than just market cap waiting stocks by focusing on some of the things we've already talked about. So that combination, I think fee compression is a good thing for investors. But we think you've got to pay attention to the total value. Now it's time to round out the conversation with some thoughtful analysis and perspective to help you better understand ETFs with our Markets 102 portion of the podcast. Bill McInnes, Chief Investment Strategist at Avantis Investors, continues with us now.

Phil, it was a huge conversation, one that we could have gone on forever with, because there has been a lack of attention, relatively speaking, paid to small-cap stocks versus their large-cap cousins, certainly since the great financial crisis. I wonder from your perspective, I'd like to pick up where the conversation ended during the show and talk a little. little bit about the awareness factor, about just how much people need to start paying attention to that small and mid-cap trade versus what we've done from muscle memory for the past 20 years and just focus on large caps. Yeah. So I think, you know, the poll SBY and Chill or V-O-O-O-

and chill, right, are nice headlines. And from my perspective, that's certainly better than not investing, right? So getting folks investing in markets early and having them participate in that long-term compounding is something that I'm super passionate about and we're trying to get the word out on. But to the same point, I do think that small caps and maybe mid-caps to a certain extent in some places, international stocks, they do get overlooked in a lot of folks' portfolios. And if we look at all the research, so we've studied this a fair bit, if we go back in time and we look at the data, some of the best returns that you can find long-term are small-cap stocks, that's at the intersection of good price points

relative to their balance sheet and the profits that they're generating. And so I'm a big believer that there's not a tactical allocation that makes sense for small caps and folks portfolios. There's actually a permanent allocation that makes sense for the right kind of small caps and folks portfolios because those small caps are gonna be, you know, next three years, next five years, next 10 years,

they're gonna be the mid caps and large caps of the future. And so you can get in more on that ground in a small cap strategy. So we're very passionate about making sure people understand the opportunity that really exists there and show it to them, you know, whether it's more from valuation theory or empirically, but show them the data behind that so that hopefully they understand why it should work, how it should work, and then they can be good holders of it long term. The last thing I want to have happened is that somebody allocates to one of our strategies just because they think the performance is going to be good. That's obviously what we need to generate at the end of the day. But having the underlying thesis as to why, why do we expect it to work? Why are these the types of companies that we're deploying capital into?

I really want to have those expectations be set and hopefully managed appropriately because that's how we get the best long-term outcome for investors, is that they can hold it through the inevitable periods where it's going to be chopping. What is the difference between, I mean, we know the difference between active and passive, kind of, you know, stock picking versus index investing. When it comes to small caps, it's been a story of maybe under exposure for the, you know, for the past 10, 15, 20 years, whatever it is, and then trying to get more attention for it. But it's easy enough to do that with a Russell 2000 index fund, mutual fund, or ETF.

And there are ways to do it through actively managed funds. What exactly is then maybe the difference that people understand or have to understand, between investing when it comes to small caps specifically about the actively managed variety of funds versus just investing in, say, an IWM or a mutual fund that tracks the broader Russell 2000 at large? Yeah, so the one thing I would say is that in order to have an appropriate understanding and sort of knowledge base of the active space, I think people need to re-underite the passive space too. So I think these two things go hand in hand because at the end of the day, once we move away from the total market. And so think about the total U.S. stock market, I think an ETF like a VTI is a pretty good representation of that or an ITOT.

Right. It's it's all cap. So it's giving you large and mid and small caps. But as soon as we go into even a small cap index, if you think about somebody, something like Russell 2000 or S&P 600, those are actually pretty different indexes. And so the composition, the names that they're buying, the consideration for how does the name get in is different. So even, you know, for a long time, it was IJR that was outperforming IWM. So the S&P 600 outperforming the Russell 2000, got a bit of a reversal of that recently. So even those things, like because it tracks an index, you know, it's seen as this is a really nice tool to get the exposure. But the indexes all have different rules. So we like to at least start there and acknowledge that.

And at the end of the day, if I'm a portfolio manager of an ETF, I have to figure out what stocks I'm going to buy and how I'm going to weight them and how I'm going to rebalance. Now, if I'm tracking an index, then a lot of those decisions have been outsourced, right, where they're telling me what to buy, how much to buy, and then when I need to trade. So when we think about designing an active port, we still have to make those same decisions. So it's a matter of is a portfolio manager making those decisions or is an index house making those decisions? So I really want to make sure that anybody out there is a user of ETFs that we start from that basis, because from there, then we can talk about it all.

So the concept of if you think about with the S&P versus the Russell 2, the S&P 6 versus the Russell 2, there's an earning screen that exists within the S&P, right, where you need to have the most recent quarter in the last 4. four quarters of being profitable in order to get in. So that actually leads to a bit of a quality tilt in that index versus say to Russell 2000. We're big believers in the concept of quality and profitability that at the end of the day, you know, you want to look at is that company actually generating cash flow? If I've got a large percentage of small cap companies that have negative earnings are those companies I want in my portfolio? We would say largely no. Those aren't companies that you would want in your portfolio.

So the concept for us around the active space, I think acknowledging that on the passive space first, but then making sure that for any ETF you're buying and putting into your portfolio, you can answer those questions of why does the stock enter the portfolio? How does it get weighted and why does it leave? If you have that as your basis, then all the quantitative analysis and things that you want to do to look at cracking error, sharp ratios, or information ratios or whatever it is, baseline is super important to then be able to go and I think use that data to test your assumptions and test your theories.

It's interesting, Phil, there's an argument that you can make right now that over the course of, you know, I don't know, several decades at this point, one of the easy ways to get a good amount of diversification to global markets has been to gradually kind of tilt your way towards the large cap side of the market cap spectrum. Because for a lot of these large, these larger cap companies, as they've grown in size over the years, they almost by necessity from a total addressable market standpoint have to become more global in nature. So you look at the biggest fortune 100, 500 companies, many of them have larger exposures to international markets from a consumer perspective and everything else than some of the smaller cap companies do.

The conventional wisdom has always been that the smaller cap companies have a much more, at least in the U.S., domestically focused tilt, because they're just not as expansive enough to tap some of those markets. So you almost get like a soft international diversification in large caps, globally speaking, versus small caps. But now, if you want that international small cap exposure, you have to actively seek it, right? And there are companies and funds out there who are now tracking international versus, say, domestic U.S. small cap type companies. How much of a story is the small cap investing picture, tilting more towards the international global side of things, as opposed to that kind of safe trade of saying, hey, if I want domestically focused companies,

let's play more in that small cap space. I think that's a really interesting question because I think, and I'm a little bit focusing from a U.S.-based person's perspective here. We have clients all over the world. We have ETS all over the world. But if you think about from a US ETF consumer, I think that we're sort of more conditioned. If you look at a lot of people's portfolios, that they've sort of stylized their U.S. portfolio. And whether that's the Morningstar styleboxes or something else that's contributed to that,

there's at least more of those categories. I see a lot of asset allocations across advisor firms and everything else in my day job. And so if you look, there's a lot more likelihood that you're going to have a lot of large growth and a large value and a small growth and a small value or mid growth and a mid value, you're going to have those slots in a portfolio and then you're going to have your international. And maybe you have international developed, maybe you have emerging markets. But in a lot of those portfolios, you see, you know, there's the large concentration of funds are in the U.S. And then there's maybe only one or two that are outside the U.S. So I think your point of

actually thinking about this in totality, you know, a dedicated small cap allocation outside the U.S. is something that likely makes a lot of sense. If you're getting all your small cap exposure only to U.S. companies, then you are missing out on some significant diversification opportunities. Right. Think about whether it's companies in Japan or the U.K. or Australia or Taiwan or whatever it is, right? There's a lot of other economies out there that you can get some nice exposure to through small cap companies and that's a big part of what we do. So ABDB, which is our international developed small cap ETF, AVEE, which is our emerging market small cap ETF.

These are things that what we do is we build them on a country by country basis. And in that way, we aren't making big country vets, right? We're not saying we only think it's going to be Japan that's going to leave the way. We're in emerging markets. I only think it's going to be India. So we're giving you that market cap weighted exposure. so you get the diversification across all the regions. But then within each country, we're going to go in and look a little bit deeper and say,

well, let's think about valuations within this country because you're going to see big dispersion valuations. Let's look at the underlying profitability companies within this country and start to tilt the portfolio towards those ones that are more favorable. And so in that way, you get a portfolio that's still giving you a lot of those diversification opportunities that you mentioned on that I think are super important, but we're paying attention the underlying quality of the company. So we don't end up with a whole bunch of those

trading at negative earnings. All right, Phil, one last question before we let you go. As a small cap focused firm that deals in those types of markets that you just mentioned, what exactly are you seeing in terms of where you think the trends ultimately lead investors to in the back half of this year and into 2027?

What parts of that small cap market are you focused the most intently on with regard to kind of the activity that we could see in the coming months? So I'll answer that in sort of two ways. And the first one is I'm always, I believe in this sort of more permanent allocation to, you know, attractively priced with good underlying quality, small caps in a portfolio. So I'm somebody who's thinking about this over decades, not over, you know, the next six months or the next year. But within that context, right, I think that, um, I think that, um,

I'm a big believer in valuations long term. So valuations long term are going to tell us a lot about our future expector returns. And if you look at the valuations of where some of these asset classes are trading, that relative spread to large cap stocks, particularly U.S. large cap stocks, is pretty darn wide. It's pretty darn wide. And so all else equal, that spreads really wide. That tells me that the future on expectation is pretty darned. right on a relative basis.

So basically, in order for that, for these assets not to be able to outperform over the near term, intermediate term, you'd have to see continued multiple expansion or continued significant growth on the large cap side for small caps to kind of not be able to keep up. Because if we look back over the last, say, 10 years, I think what a lot of folks would be perhaps surprised by is the improvement in underlying fundamentals of a lot of small cap companies. I think folks have not really recognized that while there's been massive improvement of fundamentals, if we think about on the large cap side, there's been some really good improvement on the small cap side too. You just haven't seen the same price appreciation.

So you've seen big multiple expansion on the top end at the U.S., you haven't really seen that in small caps. So I think we got, you know, maybe I'm overly simplistic, but you got price as a function of, you know, what's the balance sheet look like and what are the future cash flow discounted at some rate. When we think about that underlying quality, that underlying profitability, there's a lot of great opportunities in small caps where they're generating really nice, strong cash flows. We say, look, they deserve a part in your portfolio, and whether that's for the, you know, the next six months or the long haul, I'm big believer in long haul. I think it's very attractive. All right. We'll see if investors bind to that story as well and kind of put their money

where their mouths are, so to speak, and kind of pour into those small caps more continuously. Phil McInnis and Avantis investors. Thank you very much. We'll see you again soon, sir. Thank you. All right, that does it for the ETF Edge podcast. Thanks for listening. Join us again next week or just head over to etfedge.cbc.com. Over the last few decades, technology has transformed our world in amazing ways. Through it all, Invesco QQQQEF has connected investors to the forefront of innovation. Access the future today with InvescoQQQQ.

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