The S&P 500, Dow, and NASDAQ dominate headlines. But if you want to understand the full shape of the US market, you need to know about the Russell family of indices.

About $10.6 trillion in assets are benchmarked to Russell indices globally. The structure is logical and clean. The Russell 3000 covers the 3,000 largest US-listed companies, capturing about 98% of the investable US equity market. Within that, the Russell 1000 covers the largest 1,000 companies, and the Russell 2000 covers the next 2,000, which is the standard small-cap benchmark.

In 2025, the Russell 1000 returned 17.4%. The Russell 2000 returned 12.8%. Large companies led, as they have for most of the post-2009 era.

But here is something worth noting about the Russell 2000 specifically. The traditional argument for small-cap investing is that smaller companies have more room to grow, and that markets pay less attention to them, creating pricing inefficiencies that patient investors can exploit. Since the index was created in 1979, the Russell 2000 has broadly matched the S&P 500’s long-run returns, just with more volatility.

What has changed in recent years is the quality of what remains in the public small-cap universe. As private equity and private credit markets have grown, many higher-quality small businesses have chosen to stay private rather than list publicly and face the disclosure and compliance costs of being a public company. What remains in the Russell 2000 has, on average, weaker financial characteristics than in earlier decades. The median Russell 2000 company today trades at over 30 times trailing earnings, higher than the S&P 500, despite lower average profitability. That is not the bargain it might appear to be.