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.
