USsmall-scale equities index, Russell 2000, sets new peak, buoyed by expectations of interest rate reductions
The Russell 2000 index, a benchmark that tracks small-cap U.S. companies, has been on a remarkable surge, touching an intraday record high on September 18, 20XX. This recovery can be attributed to a combination of factors, including President Donald Trump's tariff policy and the Federal Reserve's expected interest rate cut.
The tariff policy, enacted in July 2017, aimed to promote American exports by deliberately devaluing the US dollar and addressing trade imbalances. While it had mixed effects on the Russell 2000 index, it did provide a boost to some domestic producers.
The sweeping tax cut bill passed by the Senate in July, also initiated by President Trump, is expected to support domestically driven small caps more than multinational corporations. This, combined with the Federal Reserve's anticipated 25 basis point interest rate cut on Wednesday, has been additional fuel for the continued rally in small caps.
Keith Buchanan, senior portfolio manager at Globalt Investments, has noted that a catch-up trade in small caps seems to be underway. He also mentioned that the current environment is conducive for the rally in small caps to continue.
As of the current date, the Russell 2000 index has gained about 10.6% so far this year, underperforming the benchmark S&P 500, which has gained about 12.9%. However, the index has recovered about 42% from its April 7 low.
The index is now set to surpass its record close of 2,442.74 points, reached more than three years ago. In fact, it has already eclipsed its previous all-time high of 2,466.49 points, set on November 25, 2024.
Small-cap companies, which are more reliant on debt financing, tend to perform better in a lower interest-rate environment. Therefore, the Fed's interest rate cut is another factor contributing to the continued rally in small caps.
This rebound in small-cap stocks, along with the S&P 500 index and the Dow index, indicates a broader recovery in the U.S. stock market. However, it's important to note that the Mar-a-Lago Accord, while benefiting some sectors, also posed risks of inflation, trade conflicts, and uncertain long-term effects on financial markets.
As always, investors are advised to carefully consider their investment strategies and seek professional advice when making decisions.
Read also:
- Catastrophe at a U.S. Steel facility in Pennsylvania results in the loss of two lives. crucial details unveiled
- Manipulating Sympathy: Exploiting Victimhood for Personal Gain
- Prices remain a concern for the Germans
- Auto Industry Updates: Geotab, C2A, Deloitte, NOVOSENSE, Soracom, and Panasonic in Focus
