Small Cap Stocks See Record Outflows: $80 Billion Pulled In Historic 2025 Rout As Analyst Says — 'Hard To Keep Up With The Big Boys'

Investors have pulled out a record $80 billion from small-cap stocks so far in 2025, setting the stage for what could be the largest annual outflow in the history of this segment.

What Happened: On Tuesday, in a post on X, Barchart highlighted data showing 2025 has an outlier for small-cap stocks, with outflows reaching an unprecedented $80 billion, far ahead of any annual exodus over the past ten years, according to the chart shared.

The post cites data from Bank of America Global Research, showing just how extreme this year's outflow has been. Even the 2022 figure, which was previously the highest on record, doesn’t come close, falling short of the halfway mark.

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The Russell 2000 index, which tracks and is often used as a benchmark for small-cap equities, is down 0.27% year-to-date, trailing the S&P 500, which is currently up 7.34% during the same period.

It's hard to keep up with the big boys!

— Jason Piepmeier, CFA (@jasonpiepmeier) August 5, 2025

Jason Piepmer, professor of finance and economics at the Florida Atlantic College of Business, points out the same, saying “It's hard to keep up with the big boys!” referring to large-cap stocks that have been rallying in recent months.

Why It Matters: According to Jeff Weniger, head of equities at WisdomTree, small-cap stocks are 20.5% cheaper than large caps based on their price-to-earnings ratio.

In a post on X two weeks ago, Weniger said that this gap was only seen five times in the preceding 50 years, “1973, 1976, 1998, 2001 and 2020.” He says this, hinting at a multi-year rally for small-caps, drawing parallels with 1973 and 1998.

Small caps are 20.5% cheaper than large caps on price-earnings ratio. The years that witnessed this discount are 1973, 1976, 1998, 2001 and 2020. Even investors who were early in 1973 and 1998 would have then witnessed two legendary small cap cycles: 1974-1981 and 1999-2018. pic.twitter.com/2VsOmw7Y70

— Jeff Weniger (@JeffWeniger) July 22, 2025

According to analysts, small caps have been hit hard by the tariffs, given their inability to shift supply chains quickly, or handle the higher financial burdens relative to their large-cap counterparts.

However, it is also believed that deregulation, starting with reducing federal red tape, especially in energy and financial services, could result in a turnaround in the segment.

Price Action: The iShares Russell 2000 ETF (NYSE:IWM), which tracks the Russell 2000 index, was up 0.51% on Tuesday, trading at $220.85, while the SPDR S&P 500 ETF Trust (NYSE:SPY), which tracks the S&P 500, is down 0.51%, closing at $627.97.

Photo Courtesy: bangoland on Shutterstock.com

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