- Small-cap stocks rose Tuesday morning, extending a recent run of hot sessions for the Russell 2000.
- Investors have lately been searching for ways to invest in smaller companies, with Google searches for a small-cap ETF jumping, according to DataTrek.
- The outlook for smaller companies hinges in part on the prospect of interest-rate cuts, as well as the outcome of the ongoing earnings season.
Small-cap stocks rallied early Tuesday, with the Russell 2000 up nearly 1%, outpacing the S&P 500. This surge follows increased interest in smaller shares, highlighted by a spike in Google searches for “IWM,” the iShares Russell 2000 ETF.
Goldman Sachs reported the Russell 2000 recently had its best performance against the Nasdaq 100 since 2002. DataTrek Research noted that this trend reversal has caught the attention of small investors, driving capital flows into the index.
Interest rate cut expectations are fueling optimism, as lower rates could benefit debt-laden smaller companies. However, upcoming second-quarter earnings could impact the momentum, particularly if large companies report stronger results.
DataTrek remains bullish on small caps, seeing continued potential for outperformance. Comerica Wealth Management forecasts two rate cuts this year, providing further tailwinds as the U.S. economy avoids recession.
