Midcap stocks led the pack in 2005, returning 12.65% as measured by the Russell Midcap index.
"The midcaps have been the major story," said Lori Richards, director of Russell Index Client Services. "They've led the last two years consecutively."
Large-cap stocks also broke a six-year losing streak by beating small caps, with a one-year return of 6.27% for the Russell 1000 index vs. 4.55% for the Russell 2000.
"Energy has been a big driver," Ms. Richard said of the turnaround. "That sector has been doing really well, especially in large cap." Larger stocks in the Russell Midcap index are also in the Russell 1000, she added.
Russell's quarterly survey of investment managers indicated that 80% of respondents were bullish on large-cap growth stocks into 2006, and recently released minutes from the Federal Reserve Open Markets Committee, which indicated the 18-month cycle of higher interest rates is ending, "confirms that bullishness," she said.
All 12 sectors in the Russell Midcap index increased in 2005, ranging from 3.2% for autos and transportation to 61% for other energy.