This little-known indicator with an excellent record is projecting below-average long-term returns

Small- and midcap stocks will be below-average performers over the next five years.

That’s a discouraging prospect, since these sectors have already suffered more than the broad market. The Russell 2000 index RUT, for example, is 22% below its all-time high. The blue-chip-dominated Dow Jones Industrial Average DJIA, in contrast, is just 9% below its all-time high.

This…