💰Small-cap IWM Stands on the 200-DMA, Bullish in the H2 2025!
Key point: $iShares Russell 2000 ETF(IWM)$ Breaks Above 200-Day MA – Small-Caps Set to Rally in H2 2025, Rate-Cut Tailwinds, Mega-Cap Cycle Rotation, and Tax-Cut Boost Fuel the Bull Case.
$iShares Russell 2000 ETF(IWM)$ stood on the important 200MA moving average on the first trading day of H2 2025, which is indeed a good start.
As of July 1, 2025, IWM rose, rebounding 27% from the low of April 8. The performance since the beginning of the year is -1.34%.
Tigers, what small-cap stocks did you trade in the first half of 2025?
Welcome to share your orders in the comment area. [All-in]
The top 10 constituents of the $Russell 2000 Index ETF are as follow:
Overall, 8 stocks rose, 2 fell, and 6 of them rose by more than double digits, with $Hims & Hers Health Inc.(HIMS)$ leading the gains, followed by $Carpenter Technology(CRS)$ .
As of press time, Bloomberg analysts' price expectations for the 10 stocks on the list in the next 12 months are as follows, for reference only, not as direct investment advice:
$Sprouts Farmers(SFM)$ : 6 of the 17 analysts gave a buy rating, 10 gave a hold rating, and the average target price for the next 12 months is $184.43, higher than the current $162.10.
$Insmed(INSM)$ : All 18 analysts gave a buy rating, and the average target price for the next 12 months is $112, higher than the current $97.62.
$FTAI AVIATION LTD(FTAI)$ : All 12 analysts gave a buy rating, and the average target price for the next 12 months is $170, higher than the current $113.86.
$Credo Technology Group Holding Ltd(CRDO)$ : All 12 analysts gave a buy rating, and the average target price for the next 12 months is $89.73, higher than the current $87.56.
$Fabrinet(FN)$ : 6 out of 11 analysts give a buy rating, 4 give a hold rating, and the average target price for the next 12 months is $267.67, which is lower than the current $289.11.
$IONQ Inc.(IONQ)$ : 6 out of 7 analysts give a buy rating, 1 gives a hold rating, and the average target price for the next 12 months is $43.33, which is higher than the current $40.10.
$Hims & Hers Health Inc.(HIMS)$ : 5 out of 15 analysts give a buy rating, 8 give a hold rating, and 2 give a sell rating. The average target price for the next 12 months is the same as the current price.
$Carpenter Technology(CRS)$ : 6 out of 8 analysts give a buy rating, 2 give a hold rating, and the average target price for the next 12 months is $302.5, which is higher than the current $271.75.
$ATI Inc(ATI)$ : 7 out of 8 analysts give a buy rating, 1 gives a hold rating, and the average target price for the next 12 months is $277.86, higher than the current $242.14.
$Mueller(MLI)$ : Both analysts give a buy rating, and the average target price for the next 12 months is $101.5, higher than the current $82.07.
Bloomberg Consensus shows that the earnings growth expectation for small-cap stocks represented by the Russell 2000 index is only 3% in 2024, but it is expected to jump to 36% in 2025. If this earnings growth expectation can be achieved, it will provide strong support for the rise of small stocks.
Here are some expectations and influencing factors for the second half of 2025
Technical analysis:
From a technical perspective, the $iShares Russell 2000 ETF(IWM)$ shows signs of breaking out after a long three-year base pattern. Its ratio with the S&P 500 index has risen above the 200-day average, which is a positive signal for small stocks. In addition, the Russell 2000 Index has risen 45% from its low in June 2022, and this momentum indicator is expected to reach its upper limit in the second half of 2025.
Macro: Expectations of interest rate cuts and tax cuts may give small-cap stocks more room to move upward
On the one hand, if economic growth slows and inflation concerns intensify, it may lead to a market correction, which will put some pressure on the trend of $iShares Russell 2000 ETF(IWM)$ . But on the other hand, expectations of interest rate cuts are more favorable to small-cap stocks.
The market generally expects the Federal Reserve to cut interest rates in the second half of 2025, which will reduce borrowing costs, especially for small-cap companies that rely heavily on credit. A lower interest rate environment helps to improve the profit margins of small-cap companies and encourages investors to turn to riskier small-cap assets to seek higher returns.
Historically, small-cap stocks have outperformed large-cap stocks after the Fed's first rate cut. According to Jefferies' analysis of data sinall-cap ce 1950, smstocks rose by 11%, 15% and 28% after the first rate cut by the Federal Reserve in 3, 6 and 12 months, respectively, all higher than large-cap stocks.
Policy support expectations:
The tax cut 2.0 plan that the Trump administration may promote will reduce the effective corporate tax rate from 21% to 15%, directly increasing the earnings of S&P 500 constituents by 3%-5%. Although this policy is mainly aimed at large-cap stocks, the improvement of the overall economic environment and the increase in corporate profits will also indirectly benefit small-cap stocks.
Market cycle factors: There is a phenomenon of cyclical alternation between small-cap stocks and large-cap stocks.
The current large-cap stock cycle began in 2021 and is part of a larger cycle that has favored large-cap stocks since 2013.
The three-year rate of change of the Russell 2000 index is entering the positive zone after experiencing one of the worst performance periods in history. This change has only occurred in 1990, 2003, 2009 and 2020 in history.
Therefore, from the perspective of cycle conversion, small-cap stocks are expected to perform well in the second half of 2025.
Here are some institutions' optimistic expectations vs. cautious views
Optimistic expectations:
Analysts at Oppenheimer Asset Management recommend that investors pay attention to small-cap stocks, and believe that as the bull market cycle enters its third year, the appeal of large-cap stocks may weaken, and small-cap stocks are expected to outperform large-cap stocks.
$Morgan Stanley(MS)$ also pointed out that small-cap stocks in the US stock market have continued to sluggish since 2022 under the pressure of aggressive interest rate hikes by the Federal Reserve and long-term high interest rates, but have recently continued to benefit from the Fed's interest rate cut cycle and the expectation of a "soft landing" for the US economy. The broader stock market rotates to small and medium-cap stocks.
Ryan Dietrich, chief market strategist at Carson Group, predicts that earnings growth for the S&P Small Cap 600 Index will reach 17% to 18% in 2025, outperforming large-cap stocks.
Cautious views: Despite many optimistic expectations, some institutions are cautious.
$Morgan Stanley(MS)$ analysis team said that before being completely optimistic about the prospects of small-cap stocks in the US stock market, the agency is still waiting for some actual evidence at the macro level to support the bullish logic of small-cap stocks.
[Heart]Tigers, the second half of 2025 has begun,
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What are you focusing on?[Miser]
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