Russell 2000 Outpaces S&P 500 As Small Caps Anticipate Fed's Interest Rate Move
Portfolio Pulse from Surbhi Jain
The Russell 2000 Index has outperformed the S&P 500, driven by anticipation of a Federal Reserve interest rate cut. Small-cap stocks, particularly those in the Russell 2000, have surged, with notable gains in IGM Biosciences, Intuitive Machines, and Applied Therapeutics. ETFs like IWM and VB offer exposure to this trend. However, potential economic challenges could impact the rally's sustainability.
September 18, 2024 | 3:22 pm
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NEUTRAL IMPACT
The SPDR S&P 500 ETF (SPY) has underperformed compared to the Russell 2000 ETF (IWM) as small-cap stocks gain from anticipated Fed rate cuts. SPY's performance may be less impacted by rate changes.
SPY has gained less than IWM due to the focus on small-cap stocks benefiting from potential rate cuts. SPY's larger-cap focus may see less direct impact.
CONFIDENCE 85
IMPORTANCE 60
RELEVANCE 70
POSITIVE IMPACT
Applied Therapeutics Inc (APLT) has seen a 44.90% increase in its stock price over the past week, contributing to the Russell 2000's outperformance.
APLT's stock price increase is part of the broader small-cap rally driven by expectations of a Fed rate cut, which benefits companies with floating-rate debt.
CONFIDENCE 80
IMPORTANCE 70
RELEVANCE 60
POSITIVE IMPACT
IGM Biosciences Inc (IGMS) has seen a significant price increase of 59.33% over the past week, contributing to the Russell 2000's outperformance.
IGMS's significant price increase is part of the broader small-cap rally driven by expectations of a Fed rate cut, which benefits companies with floating-rate debt.
CONFIDENCE 80
IMPORTANCE 70
RELEVANCE 60
POSITIVE IMPACT
The iShares Russell 2000 ETF (IWM) has shown strong bullish momentum, outperforming the S&P 500 ETF (SPY) due to anticipated Fed rate cuts. This ETF is positioned above key moving averages, indicating continued strength in small-cap stocks.
IWM has outperformed due to expectations of a Fed rate cut, which benefits small-cap stocks reliant on floating-rate debt. Its position above key SMAs suggests continued bullish momentum.
CONFIDENCE 90
IMPORTANCE 80
RELEVANCE 90
POSITIVE IMPACT
Intuitive Machines Inc (LUNR) has experienced a 38.62% increase in its stock price over the past week, contributing to the small-cap rally.
LUNR's stock price increase is part of the small-cap rally driven by anticipated Fed rate cuts, which are expected to lower borrowing costs for small-cap companies.
CONFIDENCE 80
IMPORTANCE 70
RELEVANCE 60
POSITIVE IMPACT
The SPDR S&P 600 Small Cap ETF (SLY) provides broader exposure to small-cap companies that might benefit from lower interest rates.
SLY provides exposure to a wide range of small-cap companies, which are expected to benefit from anticipated Fed rate cuts, making it a potential beneficiary of the small-cap rally.
CONFIDENCE 85
IMPORTANCE 70
RELEVANCE 75
POSITIVE IMPACT
The Vanguard Small-Cap ETF (VB) offers diversified exposure to small-cap stocks, which are benefiting from anticipated Fed rate cuts. VB is a way to capitalize on the small-cap rally.
VB provides exposure to small-cap stocks, which are expected to benefit from lower borrowing costs due to anticipated Fed rate cuts. This makes VB an attractive option for investors.
CONFIDENCE 85
IMPORTANCE 75
RELEVANCE 80