Morningstar Senior Markets Research Analyst Tim Strauts has compared trends in small and large cap performance since 2000. Data shows that small cap US stock has offered better returns compared to large cap. 

Tim says the strong outperformance of shares in small businesses since 2000 is mainly due to the tech bubble, when U.S. large cap stocks became extremely overvalued. The valuation advantage allowed small caps to outperform over the next 14 years.

Now, data shows that increased volatility and a slight valuation advantage for large caps are causing small caps to lose some of their edge. They currently trade around 21 times earnings and large caps trade at around 18.

Tim expects that small-cap and large-cap returns will fluctuate on a much more frequent basis, with small caps no longer having the big advantage