Content and data provided by various third parties and Fidelity − Terms of Use | Help/Glossary
Research > ETFs > ETF / ETP Commentary > 

T. Rowe Price's Love Says Small-Cap Earnings Are Turning

BY | ETF Database
07/22/2026 | 6 VIEWS
Small-cap and mid-cap stocks are outrunning large caps in 2026, and one portfolio manager says the shift has room to run.Key Takeaways: Earnings estimates for small caps are rising after 10 quarters of declines. Small and mid-cap stocks trade 20% to 35% below large caps. TMSL has returned 26.62% over the past year. Jodi Love, lead portfolio manager of the T. Rowe Price Small-Mid Cap ETF (TMSL B+), said on Bloomberg’s “ETF IQ” that narrow mega-cap and AI leadership has driven recent years. But she said 2026 looks different. The small-cap benchmark is up about 20% year to date, compared with a gain of just below 10% for large-cap indexes. That rotation follows 10 straight quarters of declining earnings estimates for small- and mid-cap companies. The trend turned in the first quarter of this year, Love said, and consensus estimates now point to accelerating earnings growth through the rest of 2026 and into 2027. Those gains are starting from a discount. Small and mid-cap stocks trade at 20% to 35% below large-cap indexes, Love said, leaving more room to grow from a lower valuation base. See more: Small-Caps Offer Rare Value as Sector Gaps NarrowSmall-Cap Stock Picks Target AI's SuppliersRather than chasing megacap technology stocks in the AI trade, Love said her fund favors the “picks and shovels” companies that benefit from big tech’s capital spending. Her top overweights are industrials, financials and health care, including aerospace and defense, regional banks and biotech. Eric Balchunas, senior ETF analyst at Bloomberg, compared small caps to college basketball, where top prospects often skip straight to the pros instead of staying in the minors. Love pushed back on the idea that the small-cap market lacks the presence of strong companies. She pointed to holdings that graduated out of the Russell 2500 index, including SanDisk Corp. (SNDK), Ciena Corp. (CIEN) and Fabrinet (FN). She said the fund identified those names early and sold them through the ETF’s redemption process to lock in gains. Some names exit through acquisitions instead. Love pointed to a biotech holding that Vertex Pharmaceuticals Inc. (VRTX) bought out a few weeks earlier. That holding, Crinetics Pharmaceuticals Inc. (CRNX), agreed on July 6 to a $10 billion buyout from Vertex. A rebound in small-cap IPO activity is also feeding the pipeline, Love said. New listings, many in industrials, have arrived almost every week this year after what she called a “pretty slow lull” about a year ago.How TMSL Captures the Small-Cap ShiftThat shift has shown up in TMSL’s own numbers. The fund has returned 17.8% year-to-date and 26.6% over the past year, according to ETF Database. Investors have added about $1.2 billion in new money this year, pushing total assets to about $2.7 billion. TMSL launched in June 2003 and recently crossed the three-year anniversary milestone. Love called TMSL a truly active ETF. She said it stays aware of the Russell 2500 benchmark but doesn’t hug it, with an active share close to 80%. That approach lets the fund sell winners as they graduate into large caps and redirect the money into new ideas. Small caps have underperformed large caps for almost two decades, Love said. Once that trend inflects, as it has this year, she said the reversal historically tends to last for several years. She cited earnings growth, valuation discounts and a growing number of SMID companies tied to U.S. domestic policy. For more news, information, and analysis, visit our Active ETF Content Hub.

More Commentary

Predicting What Could Move This Robinhood ETF
BY | ETF Database
07/22/2026 | 13 VIEWS
Alphabet Earnings Loom Large: Do You Own The Right Funds?
BY | ETF Database
07/22/2026 | 17 VIEWS
ETFs for the Next Leg of Earnings Expansion
BY | ETF Database
07/22/2026 | 57 VIEWS
View more Commentary

Search Commentary

Enter Keyword(s)
Filter Results

Performance data shown is past performance and is no guarantee of future results. Current performance may be higher or lower than the performance data quoted. Yield and return will vary, therefore you have a gain or loss when you sell your shares. For standard quarterly performance, go to the fund's Snapshot page by clicking on the ETF/ETP's symbol.

ETFs may trade at a premium or discount to their NAV and are subject to the market fluctuations of their underlying investments.

For iShares ETFs, Fidelity receives compensation from the ETF sponsor and/or its affiliates in connection with an exclusive long-term marketing program that includes promotion of iShares ETFs and inclusion of iShares funds in certain FBS platforms and investment programs. Please note, this security will not be marginable for 30 days from the settlement date, at which time it will automatically become eligible for margin collateral. Additional information about the sources, amounts, and terms of compensation can be found in the ETF's prospectus and related documents. Fidelity may add or waive commissions on ETFs without prior notice. BlackRock and iShares are registered trademarks of BlackRock, Inc. and its affiliates.

FBS receives compensation from the fund's advisor or its affiliates in connection with a marketing program that includes the promotion of this security and other ETFs to customers ("Marketing Program"). The Marketing Program creates incentives for FBS to encourage the purchase of certain ETFs. Additional information about the sources, amounts, and terms of compensation is in the ETF's prospectus and related documents. Please note that this security will not be marginable for 30 days from the settlement date, at which time it will automatically become eligible for margin collateral.

News, commentary (including "Related Symbols") and events are from third-party sources unaffiliated with Fidelity. Fidelity does not endorse or adopt their content. Fidelity makes no guarantees that information supplied is accurate, complete, or timely, and does not provide any warranties regarding results obtained from their use.

Any data, charts and other information provided on this page are intended to help self-directed investors evaluate exchange traded products (ETPs), including, but limited to exchange traded funds (ETFs) and exchange traded notes (ETNs). Criteria and inputs entered, including the choice to make ETP comparisons, are at the sole discretion of the user and are solely for the convenience of the user. Analyst opinions, ratings and reports are provided by third-parties unaffiliated with Fidelity. All information supplied or obtained from this page is for informational purposes only and should not be considered investment advice or guidance, an offer of or a solicitation of an offer to buy or sell a particular security, or a recommendation or endorsement by Fidelity of any security or investment strategy. Fidelity does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating ETPs. Fidelity makes no guarantees that information supplied is accurate, complete, or timely, and does not provide any warranties regarding results obtained from their use. Determine which securities are right for you based on your investment objectives, risk tolerance, financial situation and other individual factors and re-evaluate them on a periodic basis.

Before investing in any exchange traded product, you should consider its investment objective, risks, charges and expenses. Contact Fidelity for a prospectus, offering circular or, if available, a summary prospectus containing this information. Read it carefully.