The Russell 2000 index, which tracks roughly 2,000 smaller U.S. companies, has gained 17.3% year-to-date and 30.7% over the trailing 12-month period. That 12-month return places small-caps well ahead of their historical annual average of roughly 10 to 12%. The move reflects a broad re-pricing of domestically focused businesses that had lagged large-cap indices through much of the prior rate-hiking cycle.
Investors holding IWM or other small-cap ETFs have seen outsized gains compared to the S&P 500 over the same window. Small-caps tend to carry more floating-rate debt than large companies, so their strong performance signals that markets are pricing in meaningful rate relief ahead. A rotation this size also pulls capital away from mega-cap tech, which can weigh on QQQ and SPY at the margin.
Next FOMC rate decision: July 30. August CPI inflation report: approximately August 13. Q2 earnings season for small-cap reporting: July through mid-August.
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