Small Caps Eye Strongest Month Against Tech Stocks In 22 Years: Why Presidential Elections Could Push Russell 2000 To Record Highs
Portfolio Pulse from Piero Cingari
July saw a significant market rotation with investors moving towards small-cap stocks, anticipating Federal Reserve interest rate cuts. The iShares Russell 2000 ETF (IWM) had its best monthly performance against the Nasdaq 100 (QQQ) since April 2002, with a 9.2% rally. The Russell 2000 could continue to outperform if the Fed cuts rates as expected.
July 30, 2024 | 7:28 pm
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NEGATIVE IMPACT
The Invesco QQQ Trust (QQQ) fell by 5% in July, underperforming the iShares Russell 2000 ETF (IWM) by 14%. The shift towards small-cap stocks is driven by expectations of Federal Reserve interest rate cuts.
The underperformance of QQQ is a result of the market rotation towards small-cap stocks, driven by expectations of Federal Reserve interest rate cuts. This trend may continue if the Fed proceeds with the expected rate cuts.
CONFIDENCE 85
IMPORTANCE 80
RELEVANCE 100
POSITIVE IMPACT
The iShares Russell 2000 ETF (IWM) experienced a 9.2% rally in July, marking its best performance against the Nasdaq 100 since April 2002. Anticipated Federal Reserve interest rate cuts could further boost small-cap stocks.
The strong performance of IWM is directly tied to investor expectations of Federal Reserve interest rate cuts, which would make borrowing cheaper for smaller companies. This trend is likely to continue if the Fed proceeds with the expected rate cuts.
CONFIDENCE 90
IMPORTANCE 90
RELEVANCE 100