RXST - Small-Cap Stocks 2024 Second Half Outlook - Buy Small Caps

2024-07-16 07:00:00 ET

Summary

• Small-cap stocks struggled in the first half of 2024 due to economic concerns and higher interest rates, lagging behind broader market indexes.
• The outlook for small caps in the second half depends on timely interest rate cuts and stable economic growth, with potential for a rebound.
• Interest rate cycle change, due to progress on reducing inflation, presents a once-a-cycle opportunity for small-cap stocks.
• Anticipated rate cuts can lead to a stronger second half for small-cap stocks, and the opportunity can be tapped into by exposure to the smallcap ETFs of IJR, IWM.

Small-Cap Pulse

Small-cap stocks faced a challenging environment in the first half of 2024, burdened by concerns of an impending economic slowdown and higher interest rates, similar to the issues encountered in 2023. While economic growth has slowed, it has remained positive. Second quarter GDP numbers are expected to be stronger than the first, but persistent fears have restrained small-cap performance.

During the first half of 2024, small caps lagged behind broader market indexes, which reached new highs. The Nasdaq ( QQQ ) and S&P 500 ( SPY ) indexes increased by 18% and 15%, respectively. Conversely, the Russell 2000 Index ( IWM ), the most widely used small cap benchmark, rose only 1%, and the S&P Small Cap 600 Index ( IJR ) slipped by 1%. The Prudent Small Cap model portfolio performed significantly better in this difficult environment, rising 36%....

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