Small caps up 22% in H1 2026, best since 1991. Is the Russell 2000 actually for real this time?

IWM quietly had its best first half since 1991, up roughly 22%. And it's not the usual suspects driving it.

16 Of the top 50 Russell 2000 performers are tied to semiconductors. We're talking AI supply-chain plays, not the mega-caps everyone's already in. Aehr Test, Ichor, MaxLinear all posted 400%+ gains. That's insane.

The macro setup looks ok-ish. Oil pulled back from $110+ to around $68. Earnings expectations for small caps are calling for 48% EPS growth vs. 24% for S&P 500. Consensus seems bullish.

But here's the catch, and tbh this is what makes me nervous: Russell 2000 is trading at 26x forward P/E, a 28% premium to the S&P 500. Meanwhile actual 2026 EPS estimates for the index got revised down 9% YTD while S&P 500's went up 9%. Checked the charts on moomoo and that divergence between price action and estimate revisions looks pretty stretched.

Rate sensitivity is still the wildcard. Small caps tend to get wrecked when rates stay high longer, and we're not out of the woods.

Ngl I'm torn. The AI supply chain angle is real but the valuation premium feels like it's pricing in a lot of things going right. Anyone else holding small cap exposure or did you rotate out already?