State Street Forecasts Small Caps and EM to Edge Out S&P 500 Over Next 5 Years

State Street's updated April forecasts project the S&P Small Cap 600 and MSCI Emerging Markets at 7.6% and 7.5% annualized returns over the next 3-5 years, slightly surpassing the S&P 500's 7.1%. Coverage highlights ETFs like Vanguard S&P Small-Cap 600 (VIOO, 0.07% expense) and iShares MSCI Emerging Markets (EEM, 0.72%) for their valuation and earnings growth potential versus the S&P 500 (VOO, 0.03%). Despite past decade outperformance by S&P 500 (315% total return), articles flag risks like high U.S. rates, Iran war tensions, and tech/AI strength favoring large caps, with authors leaning toward S&P allocation.