Small-Caps Stocks Are Starting to Find Momentum
US rate cuts may add extra fuel to the rally in some of the riskiest shares.
For all the attention on the money-minting gains from AI today, there’s an often-f0rgotten corner of the market that’s been rallying — small-cap stocks.
The Russell 2000 Index is up 7.3% so far in August, which ties for its best month relative to the S&P 500 since July 2024. With the Federal Reserve seemingly prepared to cut interest rates at its meeting next month, there is reason to expect more gains from the index, which includes regional banks and industrial companies that could benefit from looser monetary policy.
“The potential is certainly there” for the small-cap index to keep rising, said Matt Maley, chief market strategist at Miller Tabak. “You have the momentum now, which has been badly missing for a long time.”
It’s been a tough few years for the group. Unless something drastic happens by Friday, it will mark the small-cap gauge’s longest streak without a record since the dot-com bubble. By contrast, the S&P 500 Index has clocked 19 records this year alone.