Piper Sandler expects the Russell 2000 to outperform the S&P 500 in 2025

Piper Sandler expects the small- and mid-cap Russell 2000 index to outgain the large-cap S&P 500 in 2025. The investment bank believes that stocks of smaller companies offer investors the «most compelling opportunities,» as the underlying businesses are bolstered by a robust labor market, rising productivity, and an overall strong U.S. economy.

Details

Piper Sandler’s chief market technician, Craig Johnson, believes that the Russell 2000 is set to outperform the S&P 500 this year, as reported by CNBC. He expects the S&P 500 to rise about 9% in 2025 to 6,600 points. However, he did not provide a specific estimate for the Russell 2000.

«The technical evidence of our sector, group, and trend work remains bullish, and we believe this bull market still has more room to run in 2025. At this time, our trend work suggests that SMID-cap stocks offer the most compelling opportunities,» CNBC quoted Johnson as saying.

As key growth drivers for these companies he highlighted a robust labor market, AI-driven productivity gains, and the overall strength of the U.S. economy.

Context

Piper Sandler is not alone in expecting an outperformance by small- and mid-cap stocks in 2025. In a December strategic review, Freedom Broker offered its view that the S&P SmallCap 600 will rise about 23% this year to 1,780 points and the S&P 500 around 12% to 6,760 points. It thinks the financial performance of smaller companies will be bolstered by strong consumer demand in the U.S., while the new administration under Donald Trump is also seen as positive for these firms thanks to promised corporate tax cuts and a tighter trade policy.

Small caps are slightly outperforming the S&P 500 so far in 2025. For the year to date, the Russell 2000 and the S&P 600 have added a respective 2.5% and 2.7%, versus a 2.2% gain for the S&P 500.