Small-Cap Sprint

Little guys do win, at least during a recovery. Small companies are often more nimble—with less burdensome balance sheets and lower fixed costs—than larger rivals, advantages that usually help them bounce back from slumps more quickly.

Since the market bottom last March, the Russell 2000, a benchmark for small U.S. stocks, returned 99%, topping the S&P 500's gain of 75%. Lord Abbett senior economist Milton Ezrati thinks the outperformance will persist: His research shows that in seven of the past 10 major recoveries, small caps have beaten large caps for at least three years.