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As of mid June, the Russell 2000 is running laps around all of the other major U.S. indices, and the outperformance is not even close. Starting the week of June 15th, the Russell 2000 is up by almost 18%, which is nearly double the Nasdaq’s 10.1% year-to-date gain; the S&P 500 is up 8%, and the venerable Dow Jones Industrial Average is up 6.4%. The Russell 2000 is explicitly constructed as the benchmark for the U.S. small-cap segment.
It consists of the smallest 2,000 companies (by market capitalization) in the broader Russell 3000 Index, which covers roughly 98% of the investable U.S. equity market. Investors have rotated toward smaller companies as optimism builds around a resilient economy. While the prospect of lower interest rates may have to wait until next year, as inflation has returned due to rising energy prices and supply chain issues, growing unease about how concentrated the market is in a handful of giant tech stocks has led to a change of direction, and the shift has paid off; small-caps have punched above their weight for stretches this year, at times stringing together consecutive sessions of outperforming the S&P 500 and touching record highs, even as large-cap indexes whipsawed on the back of turbulence in the tech sector.