US2000 gains 2.20% 📌

US2000 futures on the Russell 2000 index, representing small-cap companies from the USA, are gaining 2.00% today, breaking above the significant 2200-point level. US2000 has thus recorded a 7.25% increase over the last three trading days since Thursday.

Companies within the US2000 index are seeing significant double-digit gains today. Source: Bloomberg Finance LP

Broader stock markets are also seeing significant gains today, starting the new week optimistically. The gains appear to be driven by unexpected events from the weekend, specifically the assassination attempt on the presidential candidate in the November elections in the USA, Donald Trump. As a result of the attempt, markets are pricing in higher chances of winning the election. Among the best performers are oil producers, arms manufacturers, private prisons, and health insurers.

Despite impressive gains in recent days, small-cap stocks still lag behind large-cap stocks. Since the beginning of the year, US2000 has recorded just a 7.80% increase compared to over 20.00% gains in the US500 index. However, investor attention seems to be returning to the small-cap sector. The prospect of interest rate cuts as early as September supports investors' confidence in smaller companies. The effect of capital rotation was observed during the last CPI report release, when the US500 and US100 indexes recorded significant declines, while US2000 gained 0.70%. Weekly data on inflows into the IShare exchange-traded fund also seem to confirm growing interest in this sector. Of the total inflows of USD 8.65 billion in the week ended July 12, the largest participant was the Russell 2000, which added a net USD 3.7 billion.

US2000 (D1)

In the longer term, the correlation between the US500 and US2000 (Russell 2000) indexes remains very high. However, since the beginning of 2023, we can observe a significant divergence in the chart of both indexes. Large companies are faring much better in a more competitive environment of high interest rates. In recent days, however, we are seeing an attempt by the US2000 index to make up for "lost months," resulting in dynamic gains.

Source: xStation 5