• Small- and mid-cap indexes offer exposure to companies with growth potential and portfolio diversification during economic downturns.
  • The S&P SmallCap 600 and MidCap 400 indexes provide access to popular stocks without the need to own them individually.
  • CME Group now offers both E-mini and Micro E-mini futures on the S&P SmallCap 600 and MidCap 400

In recent years, large-cap stocks have seen a run-up unlike any other in history. While the S&P 500 has come down from its record-high in December 2021, its recent success means large-caps have distracted market participants from other offerings, like small- and mid-cap stocks, two universes that should not be overlooked.

While the S&P 500 Index is the most widely traded of the U.S. indices, it has become more evident than ever that index choice matters. Over a long time, both the S&P SmallCap 600 and MidCap 400 have outperformed their larger counterpart, exemplifying the benefits of including these smaller market indexes in a portfolio. In addition, small-caps typically outperform in periods of economic stress and the current inverted yield curve indicates the U.S. may be entering a more challenging economic environment.

Historical performance (rebased to 100)

A central tenet of this outperformance trend is that smaller companies are nimbler and able to adapt more rapidly to changing market conditions. Their smaller size also means that these small-cap companies tend to be more of a reflection of the domestic economy and are typically insulated from factors affecting global markets, unlike larger companies.

The characteristics inherent to smaller companies make a compelling argument for why small- and mid-cap indexes could be beneficial choices for market participants, and futures provide a flexible way to gain exposure without owning the underlying stocks.

Spotlight on single stocks

Small-cap companies are inherently more volatile and can therefore be prone to bouts of heavy trading. In comparing the annualized risk of the S&P SmallCap 600 to the S&P MidCap 400 and the S&P 500, the percentage is higher for small-caps, illustrating the heightened risk that comes with trading small-cap stocks.

Annualized Risk

  3-Year 5-Year 10-Year
S&P 500 19.17% 18.59% 14.81%
S&P MidCap 400 20.92% 22.31% 17.53%
S&P SmallCap 600 21.99% 23.91% 19.31%

Source: SPDJI

However, heightened risk can translate into greater trading opportunities. Included in the S&P SmallCap 600 index are stocks that have seen extreme volatility and high trading volumes in recent years. Bed Bath & Beyond and AMC Entertainment Holdings are two stocks that were at the forefront of the meme stock craze that began in 2020, and both stocks are included in the S&P SmallCap 600. GameStop Corp, another stock that has seen heavy trading in recent history, is included in the S&P MidCap 400 index.

For traders looking to participate in these market trends, trading the S&P SmallCap 600 and MidCap 400 provides access and exposure without the added burden of owning and managing the individual stocks. Furthermore, futures can be an appropriate and efficient way to carry out these strategies as they are equipped to manage the risk associated with these stocks.

A brief overview

The S&P 500, S&P MidCap 400, and S&P SmallCap 600 indexes are mutually exclusive and together makeup the larger S&P Composite 1500 index, providing broad, yet precise coverage of equity markets.

The S&P MidCap 400 index encompasses companies between $4.6 to $12.7 billion in market capitalization, with an average market capitalization of $5.87 billion as of February 28, 2023. This gives access to mid-sized stocks that have likely survived most of their growing pains but still have plenty of growth runway compared to large-cap stocks.

A proxy for U.S. small-cap companies, the S&P SmallCap 600 index contains stocks of companies that are likely still navigating early stages of growth, which can bring heightened volatility and, by extension, more trading opportunities. The S&P SmallCap 600 index encompasses companies with an average market capitalization of $1.69 billion, a lower figure than its small-cap counterpart the Russell 2000, which has an average market capitalization of $2.95 billion as of February 28, 2023.

Both the S&P SmallCap 600 and MidCap 400 have broad sector exposure, but Industrials and Financials encompass the top two sectors for both indexes with combined weights of 34.9% and 35.7%, respectively.

Sector Weights (as of March 7, 2023)

A snapshot of the top 10 constituents for each index is provided below, giving market participants a view on the breadth of companies and sectors within each index. The top 10 constituents for the S&P MidCap 400 are industrials-heavy, whereas the S&P SmallCap 600 has a wider array of sectors representing the top 10.

Top 10 Constituents (as of March 7, 2023)

  S&P SmallCap 600 S&P MidCap 400
Rank Constituent Name Sector Constituent Name Sector
1 Applied Industrial Technologies Industrials Fair Isaac & Co Inc Information Technology
2 ATI Inc. Materials Reliance Steel & Aluminum Materials
3 Comfort Systems USA Inc Industrials Axon Enterprise Inc Industrials
4 SPS Commerce Inc Information Technology Carlisle Cos Industrials
5 Exponent Inc Industrials Hubbell Inc Industrials
6 Asbury Automotive Group Inc Consumer Discretionary Builders FirstSource Industrials
7 THE ENSIGN GROUP Health Care AECOM Industrials
8 Academy Sports and Outdoors, Inc. Consumer Discretionary Lattice Semiconductor Co Information Technology
9 Rambus Inc Information Technology Toro Co Industrials
10 Helmerich & Payne Inc Energy Graco Inc Industrials

Source: SPDJI

Futures provide an efficient way to gain exposure

CME Group offers Micro E-mini and E-mini S&P SmallCap 600 and MidCap 400 futures. The Micro futures have a $10 multiplier, which is 1/10 the size of the E-mini contract, offering more granular exposure to the underlying indexes and the ability to trade in a more flexible manner.

When trading futures, market participants can also enjoy added benefits, like CME Group’s centrally cleared platform, margin offsets when trading across the S&P suite, and the potential to qualify for 60/40 U.S. tax treatment rather than ordinary income tax as Section 1256 contracts.1 Market participants who already hold positions in E-mini S&P 500 futures can trade Micro or E-mini futures on the S&P SmallCap 600 and MidCap 400 indexes without duplicating exposure, providing a seamless way to express views on the small- and mid-cap universes while gaining exposure across all market cap sectors.

E-mini S&P MidCap 400 Index futures have seen success in the last 20 years the contract has been trading, reaching nearly 110 million contracts in cumulative volume since its launch in 2002. Open interest in the contract has been over 40,000 in recent months.

E-mini MidCap 400 Index Futures Cumulative Volume

By trading futures on these indexes, market participants can capitalize on trading opportunities impacting both equity markets and smaller-sized companies.

Diversification benefits

When observing historical correlations of the S&P MidCap 400, S&P 500, and S&P SmallCap 600 indexes, the S&P SmallCap 600 exhibits a lower correlation with the S&P 500, indicating a greater potential for portfolio diversification.

During periods of economic distress and overall equity downturns, as experienced in 2020, small-cap stocks exhibit decreased correlation with broad market indexes, like the S&P 500. The mid-cap universe had a less pronounced decline in correlation during these same periods, yet still exhibits a lower correlation with large-cap stocks.

60-day rolling correlations

These trends indicate that portfolio diversification can be one major benefit of adding the S&P SmallCap 600 and MidCap 400 to one’s portfolio alongside a large-cap benchmark during economic downturns.


As the U.S. economy continues to grapple with a potential recession and elevated inflation, the time is ripe for market participants to reflect on their portfolio decisions. The benefits of adding small- and mid-cap stocks, particularly during times of economic uncertainty, are important considerations. Futures provide a way to gain exposure to these benefits in addition to managing the unique risks inherent to smaller companies.

Market participants can trade small-, medium-, and large-cap stocks with ease using CME Group’s suite of S&P futures, now including Micro E-mini S&P MidlCap 400 and Micro E-mini S&P SmallCap 600 futures.

For more information on how to trade futures on these indexes, visit cmegroup.com/microemini.


1Not intended as tax advice. Please consult your tax advisor and/or FCM for more information.

All examples in this report are hypothetical interpretations of situations and are used for explanation purposes only. The views in this report reflect solely those of the author and not necessarily those of CME Group or its affiliated institutions. This report and the information herein should not be considered investment advice or the results of actual market experience.

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