Learn Arabic (Modern Standard): اللافتة مثلث صغير.

The adjective صغير is describing the word مثلث (triangle), not اللافتة (the sign). Because مثلث is a masculine noun, its adjective must also be masculine to match it perfectly.

Shouldn't the predicate match the subject in gender? Why isn't it مثلثة?

In Arabic, if the predicate (the part after the implied 'is') is an adjective, it must match the subject's gender. However, if the predicate is a noun like مثلث, it keeps its own inherent gender. Since a triangle is always a masculine word, it doesn't change to feminine just because the sign is feminine.

How do we know this means 'The sign is a small triangle' and not 'The small triangle sign'?

It all comes down to definiteness. اللافتة has ال (the), making it definite. مثلث صغير does not have ال, making it indefinite. When a definite noun is followed by an indefinite noun or phrase, it creates a nominal sentence with an implied 'is' between them. If it were a single phrase like 'the small triangle sign', all the words would need to match in definiteness.