Hot 2026 Start for This ETF Could Signal Durable Upside

Small-cap stocks are off to hot starts this year. This sparks hopes the asset class could finally be in for a year of impressive performances. Count the Invesco NASDAQ Future Gen 200 ETF (QQQS) among the ETFs in the category starting 2026 on solid ground.

The ETF is higher by 7.16% year-to-date. Yes, some of that bullishness may be attributable to the January Effect – the scenario in which smaller stocks rally in a new year’s early stages, potentially paving the way for broader market gains over the course of the year.

“Small stocks often do well to start the year before giving up some gains to better-known indexes. Some market experts suggest that it’s a case of investors looking for lesser-known bargains at the beginning of the year, companies that may have been left behind in the previous 12 months,” reports Paul LaMonica for Barron’s.

Fortunately, some market observers believe this could be the start of a lengthy small-cap resurgence.

QQQS Primed for a Lengthy 2026 Rally

History could bode well for QQQS. This is to say it’s been awhile since the marquee domestic small-cap benchmarks outperformed their large-cap counterparts.

“The Russell 2000 and the S&P Small Cap 600 indexes have both underperformed the large-cap indexes for several years. The hope is that this trend could reverse itself in 2026 thanks to lower interest rates—since small companies often have more floating-rate debt than big companies—and a resilient U.S. economy,” adds LaMonica.

Of course, investors are right to demand more than a thesis rooted in “overdue.” Small-cap stocks and ETFs such as QQQS can oblige. Even with recent signs of life among smaller stocks, the group, broadly speaking, remains attractively compared to large peers and there’s a long way to go for small-caps to close the valuation chasm with bigger rivals.

Alone, that’s a compelling reason to considers ETFs such as QQQS, but that favorable trait is bolstered by the fact that smaller stocks are expected to deliver superior earnings growth relative to large-caps this year. That’s another factor that could support a sound 2026 outlook for the Invesco ETF.

Specific to QQQS, investors could accrue benefits from additional interest rate reductions. This would reduce the cost of borrowing – meaningful with regards to this ETF because some of its holdings are rumored acquisition targets.

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