Small Cap Stocks Are Having A Moment: Russell 2000 Notches Best 5-Day Rally In Over 4 Years
Portfolio Pulse from Piero Cingari
Small-cap stocks, represented by the iShares Russell 2000 ETF (IWM), have experienced their best five-day rally since June 2020, driven by expectations of a Federal Reserve interest rate cut in September. This has led to a rotation from large-cap tech stocks, tracked by the Invesco QQQ Trust (QQQ), to small caps. Despite the rally, concerns remain about the sustainability of this trend, particularly due to uncertainties in regional banks' earnings.
July 16, 2024 | 3:02 pm
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NEGATIVE IMPACT
The Invesco QQQ Trust (QQQ), which tracks the Nasdaq 100, has underperformed the Russell 2000 Index by 10.4 percentage points over the past five sessions as investors rotate from tech to small caps.
Investors are shifting focus from large-cap tech stocks to small caps due to expectations of a Fed rate cut, leading to underperformance in QQQ.
CONFIDENCE 90
IMPORTANCE 80
RELEVANCE 80
NEUTRAL IMPACT
The iShares S&P 500 Growth ETF (IVW) is indirectly mentioned as part of the valuation gap analysis between large-cap growth and small-cap value stocks, indicating potential rotation away from growth stocks.
IVW is mentioned in the context of the valuation gap with small-cap value stocks, suggesting a potential shift in investor preference but not directly impacted by the current rally.
CONFIDENCE 75
IMPORTANCE 60
RELEVANCE 50
POSITIVE IMPACT
The iShares Russell 2000 ETF (IWM) has surged 1.9%, marking its best five-day rally since June 2020, driven by expectations of a Federal Reserve interest rate cut in September.
The rally in IWM is directly tied to the market's anticipation of a Federal Reserve interest rate cut, which benefits small-cap stocks due to their reliance on bank financing.
CONFIDENCE 95
IMPORTANCE 90
RELEVANCE 100
POSITIVE IMPACT
The iShares Russell 2000 Value ETF (IWN) is highlighted as potentially appealing due to the valuation gap between large-cap growth and small-cap value stocks, which was at its widest since 2000 prior to the recent rally.
The valuation gap between large-cap growth and small-cap value stocks suggests potential for further gains in IWN as investors seek value opportunities.
CONFIDENCE 85
IMPORTANCE 70
RELEVANCE 70