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U.S. equity markets have begun 2026 with relatively muted index-level performance, but beneath the surface, leadership dynamics continue to evolve meaningfully. The early days of the year are reinforcing the rotation trends that emerged late in 2025, as investors increasingly favor smaller-capitalization stocks, value-oriented strategies, and select cyclical sectors over the mega-cap growth stocks that dominated returns in recent years. This environment has produced a widening dispersion of outcomes across asset classes, sectors, and styles, underscoring the importance of valuation discipline and diversification as market leadership broadens.  

Below we review recent ETF performance across major U.S. equity categories, followed by notable individual stock movers over the past month, before presenting our full strategy outlook.

ETF Performance

Top 3 Stock Performers (Global)

Top 3 Stock Performers (US)

Strategy Note

Eleven days into 2026, U.S. equity markets have made little progress at the headline index level, continuing to trade largely sideways. Beneath the surface, however, the rotation trends that emerged during the fourth quarter of last year remain firmly in place. Leadership continues to shift toward small-cap and value-oriented stocks.

Small-cap equities have gotten off to a particularly strong start. The Russell 2000 (IWM) has gained 7.9% year to date, significantly outperforming large-cap benchmarks. By comparison, the Vanguard S&P 500 ETF (VOO) has advanced just 1.2%, reflecting ongoing investor rotation away from the handful of mega-cap, primarily technology-driven stocks that dominated market performance over the past three years. Positions in the former “Magnificent Seven” are increasingly being used as sources of funds for stocks with smaller capitalizations and more reasonable valuations.

The value-versus-growth divergence further reinforces this trend. The Vanguard Value ETF (VTV) has posted a 2.9% year-to-date gain, while the Vanguard Growth ETF (VUG) has declined 0.3% over the same period.

Foreign equities are also continuing to outpace U.S. large-cap stocks. The iShares MSCI EAFE ETF (EFA) is up 3.5% year to date, while the iShares MSCI Emerging Markets ETF (EEM) has gained 5.8%. This relative strength supports the continuation of the weakening U.S. dollar theme that developed in 2025.  A newer low-fee alternative to EEM that has attracted strong cash flows lately is VEXC, Vanguard Emerging Markets Ex-China.  

Commodities remain another area of strength. Precious metals, in particular, continue to attract investor interest. The SPDR Gold MiniShares Trust (GLDM) is up 6.3% year to date, while silver has delivered extraordinary gains. The iShares Silver Trust (SLV) has surged 25.8% in just the first eleven days of the year, pushing its trailing twelve-month return to an exceptional 189%.

One asset class that has reversed course relative to last year is digital assets. The iShares Bitcoin Trust (IBIT), which declined approximately 15% in 2025, has rebounded strongly and is up about 9% so far in 2026.

Given the crosscurrents across asset classes and styles, maintaining diversification remains a prudent approach. While rotation toward value and small-cap stocks is evident, leadership remains fluid.

Examining this theme more closely, the largest ETF capturing both value and small-cap exposure is the iShares Russell 2000 Value ETF (IWN). Although our model assigns IWN a below-average ValuEngine rating of 2 (Sell), three of its top ten holdings carry ValuEngine ratings of 5 (Strong Buy): Hecla Mining (HL), Commercial Metals Company (CMC), and Jackson Financial (JXN).

Despite its inclusion among these top-rated holdings, ValuEngine’s valuation model suggests that Hecla Mining appears overvalued at current price levels. In contrast, both Commercial Metals and Jackson Financial exhibit more reasonable valuations according to our models and may represent timely opportunities warranting further investigation.  

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