Remember when the only stocks anyone wanted to talk about were the Magnificent Seven? That was so last year. Right now, it's the little guys stealing the show.

The Russell 2000 has roared into 2026 with the kind of momentum that makes you check your screen twice. As of Jan. 15, the small-cap benchmark—tracked by the iShares Russell 2000 ETF (IWM)—has posted intraday record highs in each of the past 10 sessions. That's impressive enough on its own, but here's the kicker: during that same stretch, small caps beat large caps every single day, outperforming the SPDR S&P 500 ETF Trust (SPY).

Want to know the last time we saw a streak like this? June 2008. Yes, that June 2008.

The numbers tell the story clearly. Year-to-date, the Russell 2000 is up more than 7%, dramatically outpacing the S&P 500's modest 1.5% gain. And the Roundhill Magnificent Seven ETF (MAGS)? It's gone absolutely nowhere—flat on the year.

What's Driving the Small-Cap Revival?

The main catalyst has been an improving macroeconomic backdrop. Stronger-than-expected economic data is reshaping the earnings outlook for smaller companies in a way that's hard to ignore.

Consider this: the Atlanta Fed's GDPNow model now estimates the U.S. economy grew at a 5.3% annualized rate in the fourth quarter. That's a pace we haven't seen outside the post-pandemic period since mid-2014. Sure, a shrinking trade deficit is helping boost the headline number, but the underlying strength points to resilient consumer spending and robust business investment.

To put that 5.3% figure in perspective, growth at this level has been rare. You'd have to go back to the second quarter of 2014 to find similar momentum, and before that, early 2006.

"Small cap revision have improved significantly ahead of the earnings season, stronger than normal," said 22V Research analyst Dennis DeBusschere in a recent note.

"That supports small-cap performance to start the year. Large- and mid-cap revisions remain negative, roughly following historical patterns," he added.

A Rare Signal From Earnings Revisions

According to 22V Research, the percentage of small-cap companies raising guidance ahead of fourth-quarter earnings has surged, overtaking both mid-cap and large-cap companies. It's the first time this has happened since January 2025.

This setup doesn't come around often, and when it does, it tends to be powerful. Similar patterns appeared during select periods in 2019, 2021, and early 2025—all of which preceded sustained stretches of small-cap outperformance.

"Small caps are discounting better fundamentals," DeBusschere said, adding that the setup supports continued outperformance in the near term.

Technical Analysts See More Room to Run

From a technical perspective, Bank of America sees room for further gains. After breaking out of a multi-year range and forming a large base pattern, the Russell 2000 looks positioned to extend its rally, according to Paul Ciana, chief technical strategist at Bank of America.

Ciana sees upside targets at 2,642, 2,861 and potentially as high as 3,000, with notable support in the 2,450 area and critical support near 2,300.

With earnings momentum accelerating, economic growth firming, and technical breakouts stacking up, early 2026 is shaping up as a classic underdog story, with small caps reclaiming center stage in investor portfolios.

Where the Gains Are Actually Coming From

The rally has been remarkably broad-based: about 77% of Russell 2000 constituents are up this year. That's the kind of participation you want to see in a healthy rally.

That said, a handful of high-flyers have contributed meaningfully to the index's overall return. Four small-cap stocks delivered triple-digit returns in less than two weeks. Erasca Inc. (ERAS) surged 153%, Critical Metals Corp. (CRML) gained 149%, Alumis Inc. (ALMS) jumped 147%, and Bakkt Holdings Inc. (BKKT) climbed 102%—all in less than two weeks.

Five individual names together contributed over 1 percentage point to the Russell's 7% year-to-date rally:

These aren't just random stocks catching a bid. They represent sectors getting real attention—defense technology, energy infrastructure, and mining companies benefiting from specific tailwinds. When you combine that with improving fundamentals across the broader small-cap universe, you get the kind of rally we're seeing now.

Whether this momentum can sustain itself remains to be seen, but for now, the small caps are having their moment. And after years of watching the Magnificent Seven dominate every conversation, that's a refreshing change of pace.