Goldman Sachs sees small-cap stocks poised for sustained rally

Small-cap stocks are finally rallying after years of lagging large caps, and Goldman Sachs is treating the move as more than a short-lived catch-up trade. Greg Tuorto, who heads the U.S. Small and SMID Cap team at Goldman Sachs Asset Management, said the next question is whether improving fundamentals can turn the rebound into a sustained run.

Goldman Sachs published the discussion, titled Big Opportunities in Small Cap Equities, on April 24, 2026, based on a conversation recorded on April 23 with Chris Hussey. The firm said small-cap equities may be poised for a sustained rally after years of underperformance, a view that matters most to client-facing teams trying to explain whether this is a tactical bounce or the start of a longer leadership shift.

The setup is different from the false starts that have repeatedly faded over the last several years. Goldman Sachs Asset Management said a prolonged period of U.S. small-cap underperformance versus large caps may now be setting up small caps for leadership in the coming cycle. The firm also said U.S. small-cap earnings growth strengthened in 2025 and the gap versus large caps narrowed, two signals that go beyond simple valuation hope and point to a broader improvement in the earnings picture.

That distinction is important for anyone fielding client calls about portfolio positioning. A rally built only on discounting past weakness can stall quickly if macro volatility returns or if earnings breadth narrows again. Goldman Sachs framed 2026 as a year when equity market returns may continue to broaden, which is the kind of backdrop small caps need if they are going to do more than trade in bursts.

For investors, the actionable question is not whether small caps have room to rebound, but whether the conditions that support them can last. Tuorto’s case implies that sustained leadership would require a durable expansion in earnings participation, a market that keeps broadening beyond a handful of mega-cap names, and enough stability for smaller companies to convert better growth into higher multiples. If those pieces hold, Goldman’s view is that small caps could move from neglected to necessary in the next cycle.