Since January 1, 2000 small cap and mid cap stocks have significantly outperformed large cap U.S. equities. Click to enlarge:
From a valuation perspective, since the beginning of 1992, mid cap equities are trading at historically high valuations compared to large cap stocks on a relative basis. Absolute valuations of mid cap stocks still look reasonable; however, if there is a reversion to the mean, large cap equities are likely to gain the upper hand on performance as one looks forward.
Maintaining some exposure to mid caps will likely be beneficial though as merger activity oftentimes targets the mid cap companies.