The Russell 2000 index of small-cap stocks has closed above 3,000 for the first time and continues to hit all-time highs.
On June 22, the Russell 2000 concluded trading at an all-time high of 3,004.40. The index is up 20% this year and outpacing all other U.S. stock indices.
The latest rally in small-cap stocks comes as investors shift capital away from richly valued technology shares and high-flying mega-cap stocks tied to the artificial intelligence (A.I.) trade.
The Russell 2000 index is rising amid a rout in technology stocks, with the Nasdaq Composite (NASDAQ: $NDAQ) index down nearly 1,000 points in premarket trading on June 23.
Analysts say that small-cap stocks continue to benefit as investors get defensive with their portfolios and look for shares of companies that are undervalued.
Small-cap stocks are loosely defined as securities with a market capitalization of less than $10 billion U.S.
Well-known small-cap stocks include restaurant chain Sweetgreen (NYSE: $SG), clothing retailer Abercrombie & Fitch (NYSE: $ANF), and Meritage Homes (NYSE: $MTH).
Some analysts say small-cap stocks are likely to continue outperforming in this year’s second half should the move away from overvalued technology stocks continue.
The prospect of higher interest rates as the U.S. Federal Reserve battles stubbornly high inflation is also making small-cap stocks more attractive, say some analysts.
Prior to this year, small-cap stocks had underperformed the broader market for more than a decade as investors focused on the Magnificent Seven tech stocks that include Apple (NASDAQ: $AAPL) and Nvidia (NASDAQ: $NVDA).
