Small-cap stocks are currently performing well, with the iShares Russell 2000 ETF (IWM) hitting its highest level since November 2021 after a 1.7% increase. This marks a four-day winning streak for IWM, which is now less than 8% from its all-time high. The Federal Reserve’s recent shift to a rate-cutting cycle, beginning with a half-point reduction last month, has been a significant catalyst for this trend. Lower interest rates enable smaller companies to secure cheaper loans, fostering business expansion and raising investor confidence that the economy may bypass a recession. While small caps have gained nearly 13% in 2024, they still trail behind the S&P 500’s 22% surge this year. JC O’Hara of Roth MKM suggests a potential “catch-up trade” benefitting smaller growth companies by year-end, identifying Hanesbrands, Dime Community Bancshares, and Insight Enterprises as promising stocks. Additionally, some analysts, such as Eric Johnston from Cantor Fitzgerald, note that a potential Trump victory in the upcoming election could further benefit small-cap stocks. Johnston believes a Trump win might lead to lower tax rates, less regulation, and increased attractiveness of U.S. goods due to tariffs on Chinese products. Recent polls show a tight race between former President Donald Trump and Vice President Kamala Harris, with Cantor CEO Howard Lutnick co-chairing Trump’s transition team. These factors contribute to an optimistic outlook for small-cap stocks as the year progresses.
Original Story https://www.cnbc.com/2024/10/17/small-caps-just-hit-levels-not-seen-in-nearly-three-years.html
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