Russell 2000 Signals Potential For All-Time Highs
The Russell 2000 has lagged the S&P 500 and NASDAQ by wide margins. While the S&P and NASDAQ have consistently made new all-time highs in 2024, the Russell 2000 has not made a new all-time high since 2021.
The culprit of small/mid caps lagging has been higher interest rates. However, that is starting to change. With the Federal Reserve cutting 50 basis points at the last meeting and markets favoring another 50 basis point cut in November, borrowing costs are starting to fall sharply.
This leaves the door open for a catch-up trade in the small and mid-cap stocks. Small and mid-caps are very undervalued in the current market versus mega-cap and large cap technology. With rates falling, these stocks are likely to play catch-up.
On a technical analysis basis, this is confirmed with the Russell 2000 now having broken out of a wedge pattern. Probability favors further upside on the Russell 2000 to new all-time highs before this market taps out.
