The Russell 2000 index (RUT) of small-cap stocks has reached a new all-time high for the first time in four years.
After years of underperformance, small-cap stocks have joined the current market rally and are rising to record heights.
Small-cap stocks are generally defined as securities with a market capitalization of less than $10 billion U.S.
The Russell 2000 index that’s comprised of small-cap equities rose 2.5% on Sept. 18 to finish the trading session at a record high of 2,467.70.
The record close was achieved a day after the U.S. Federal Reserve resumed lowering interest rates after holding them steady over the past nine months.
The Russell 2000 reached a record close for the first time since November 2021, ending a streak of 967 consecutive trading days without a new record close.
Analysts say small-cap stocks now appear to be taking off, especially as the U.S. Federal Reserve signalled that two more rate cuts are likely this year.
Small-cap stocks tend to be more sensitive to changes in interest rates than large-cap stocks, as they tend to rely more on external financing for their operations.
Since the start of August, small-cap stocks have outperformed large-caps, with the Russell 2000 index up 13.5% over the past six weeks.
That compares to a 6.9% gain in the benchmark S&P 500 index and a 10.3% rise for the technology-heavy Nasdaq Composite index (NDAQ) over the same time period.
Analysts note that small-cap stocks also have more attractive valuations currently than large-cap stocks, a factor that is likely to continue attracting investors.
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