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Wall Street JournalThis Russell 2000 ETF Pulled In $3B — Is A Small-Cap Rally On Deck For 2026?
The sleepy Thanksgiving week turned out to be anything but quiet for one small cap ETF.
The iShares Russell 2000 ETF (NYSE:IWM) pulled in an impressive $2.78 billion during the holiday-shortened stretch ending Nov 28, according to data aggregated by ETF.com. This was one of its largest weekly inflows of the year. Not only that, but in November, the ETF added $3.7 billion to its AUM.
In a week where the Vanguard S&P 500 ETF (NYSE:VOO) topped creations with $4.32 billion, IWM’s haul stands out because it points to something more strategic. The Russell 2000 Index has spent months lagging a mega-cap-fuelled rally, weighed down by tighter financial conditions and interest rate uncertainty. Yet suddenly, investors poured cash into it at a pace that hints at early positioning for a 2026 risk-on rotation.
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Why The Sudden Appetite?
A portion of the move might reflect tax-loss harvesting, with allocators selling beaten-down small-cap positions and rotating back in via the ETF wrapper. But the size of the flows suggests something bigger: a building conviction that small caps could be poised to rise as rate-cut expectations strengthen, inflation cools and credit pressures ease.
The inflow burst also comes just as semiconductor and mega-cap ETFs saw notable outflows – the Invesco QQQ Trust (NASDAQ:QQQ) lost $1.88 billion, while the Vanguard Information Technology ETF (NYSE:VGT) shed around $311 million. After a year dominated by a handful of tech giants, the flows hint at tentative diversification into areas that haven’t yet run hot.
IWM is often a high-liquidity conduit for institutional traders who want to quickly express broad small-cap views. A nearly $3 billion spike is indicative that big money may be preparing quietly for the scenario of small caps coming back into leadership as financial conditions stabilize in early 2026. For now, one week doesn’t make a trend. But looking at the past four such weeks, in a market obsessed with AI, megacaps and momentum, the sudden rush into small caps may be the clearest sign yet that investors are starting to scope out the next trade before everyone else wakes up from the holiday nap.
Two Other ETFs Poised To Ride The Upside
If investors really are waking up to the small-cap trade, two other ETFs stand out as potential vehicles for anyone betting that 2026 could finally be the year the underdogs run again.
Vanguard Small-Cap ETF (NYSE:VB) provides diversified, low-fee access to the U.S. small-cap universe, tracking the CRSP Small Cap Index. It tends to attract long-term allocators who want small-cap exposure without the higher volatility that comes with more speculative names. If small caps re-rate on expectations of easier credit and improving earnings, VB is well-positioned to capture steady inflows.
Avantis U.S. Small Cap Value ETF (NYSE:AVUV): For those investors leaning into the historic small-cap value premium, AVUV has quietly become a favorite that combines factor tilts, an active-but-rules-based approach, and surprisingly strong liquidity for a fund with a more curated portfolio. If the rally skews toward economically sensitive, cheaper names, AVUV could be one of the beneficiaries.
Taken together, the trio captures the small-cap opportunity spectrum: IWM for the tactical trader, VB for broad beta, and AVUV for those hunting for factor-driven upside. Renewed attention to small caps suggests they could be rethinking where the next leg of growth comes from.
Image: Shutterstock