Small caps put on their best monthly showing since 2020. Bank of America says there's more upside ahead

Small cap investors saw huge gains in April, and Bank of America strategists see more upside coming. The Russell 2000 jumped more than 12% last month, its best monthly performance since November 2020. It even outperformed the large cap S & P 500 , which saw an advance of 10.4% in April. "Small caps have outperformed [year to date] and we expect them to continue to lead, driven by an EPS/manufacturing recovery," wrote Bank of America analysts led by equity and quantitative strategist Jill Carey Hall in a Thursday report. Investors don't have to stick with the small cap benchmark to capture those potential gains, however. "We continue to see opportunities for active management but also in owning key themes in small caps," the strategists added. The bank called out a few exchange traded funds that go beyond the Russell 2000's constituents – and that are in in specific industries that may juice returns. Enhancing returns Hall's team highlighted the iShares US Small-Cap Equity Factor ETF (SMLF) as one way to play the theme. More than 8 out of 10 of the companies in the fund are profitable, compared to only about two-thirds of the Russell 2000, the bank found. The SMLF has five stars and a gold rating from Morningstar. The fund is up more than 11% this year and has an expense ratio of 0.15%. Stocks in the fund include nVent Electric , an artificial intelligence infrastructure play that's up more than 65% in 2026, and Apple supplier Jabil , up 48% this year. …