'Not a junk rally:' How to trade the strongest small-cap stock market in three decades

State Street's Matt Bartolini says the historic small-cap rally has more upside, driven by fundamental earnings momentum rather than a short-squeeze junk rally, with all 11 small-cap GICS sectors outperforming their large-cap counterparts for the first time in over 30 years. SPSM and SLYG ETFs are up more than 20% year-to-date, while the Russell 2000 Index is up nearly 20% — its best first half since 1991 — with over 20% EPS growth expected this quarter as more Wall Street firms upgrade small-cap earnings estimates.

Why it matters: Avantis Investors' Phil McInnis says small caps remain overlooked by investors who still favor large-cap S&P 500 exposure, and he also recommends adding non-U.S. developed markets, emerging markets (IEMG up 18% YTD), and mid-caps to portfolios.