Small caps have worst run ever in first half of 2024

The first half of 2024 was the worst relative performance ever for small caps, with the Russell 2000 index of 2,000 small-cap stocks lagging the S&P 500 index of the 500 largest stocks by approximately 13.5 percentage points.

Details

From January to June 2024, the Russell 2000 rose only 1.0%, versus a 14.5% gain for the broad US market, as represented by the S&P 500, during the same period. 

This marked the worst first half of a year for small-cap stocks, according to Bloomberg data. Previously, the widest gap between the Russell 2000 and S&P 500 indexes was back in 1998.

Sky-high interest rates are making it difficult for small companies to raise capital, as GRIT Capital, a financial media platform, wrote on Threads. With large companies thriving, investors are avoiding additional risk.

What investors need to know

The analyst community is divided on the outlook for small-cap stocks. UBS analysts are optimistic, noting that the higher Treasury yields, the worse the performance of small-cap stocks and vice versa. It used to be that way, but a “decoupling” is under way, according to RBC Capital analysts. They believe that investors should stay away from small-cap stocks for now.