Traders work on the New York Stock Exchange (NYSE) trading floor on July 11, 2024 in New York City.
Spencer Pratt | Getty Images
Small-cap stocks are on a strong run right now, having taken over the baton from Big Tech last week to lead the bull market as they hope lower interest rates will extend the economic recovery to their benefit.
this Russell 2000 IndexThe group’s benchmark index rose 1% on Tuesday after hitting its highest level since January 2022 on Monday. Bespoke Investment Group said if the index rose another 1% on Tuesday, it would be the fifth time since 1979 that the index has gained more than 1% for five consecutive days.
The small-cap benchmark has gained more than 10% in the past month, nearly three times the S&P 500’s gain.
Russell 2000
Fundstrat’s Tom Lee, who has been right about stock market moves over the past few years, said the small-cap rally could last more than two months, seeing big gains for this group.
“We think this move could take about 10 weeks, up to 40%. I think it’s just the beginning,” Lee said on CNBC’s “The Closing Bell: Overtime” on Monday.
market rotation
Investors are turning to previously unpopular corners of the market Cooling inflation data last week fueled bets that the Federal Reserve could soon cut interest rates and avert a recession. Small-cap stocks are generally more sensitive to swings in the economy and market sentiment, and could benefit significantly from falling interest rates.
Additionally, the group has gained attention as a “Trump trade” among investors and is seen as a potential beneficiary of former President Donald Trump’s victory in November.
David Kostin, chief U.S. equity strategist at Goldman Sachs, said that while Trump has no detailed second-term policy proposals, lowering taxes and regulations while raising tariffs could boost domestic stocks, including small-cap stocks. .
Betting market odds for Trump to win the election have climbed steadily in recent weeks since the June debate with President Joe Biden and his survival of an assassination attempt over the weekend.
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