The thematic exposure gap between US small and large cap stocks explains at least part of the performance rift between the two.
Only about 20% of the Russell 2000 is exposed to at least one theme as identified by Breanne Dougherty and her team over at BI THEM <GO> while roughly two-thirds of the S&P 500's market cap is associated with a theme. Likewise, the more themes a stock can be tied to, the greater the gains have been since October.
Small cap themes have generally fared well over that time with AI stocks leading thanks to a strong surge in the index's largest ever weight, Super Micro Computer (SMCI). However, that stock is pretty much a lock to join the Russell 1000 in the June reconstitution and will be included in the S&P 500 come March 18th. Even if every company with thematic exposure that's less than $5bn market cap fell out of the Russell 1000 in June, it would hardly make up for hole in small cap thematic investing left by SMCI. IPOs are likely to be little help in filling the thematic gap as 2023 was the weakest year for small cap issuance going back to 1996.