The small and micro-cap Russell 2000 index rebounded sharply yesterday, gaining 2.13%, while the $S&P 500(.SPX)$ and $NASDAQ(.IXIC)$ rose by 0.86% and 0.51% respectively.
Historically, small-cap stocks have exhibited significantly higher volatility compared to the S&P and tech stocks, indicating a higher beta.
It's worth noting that shares of $iShares Russell 2000 ETF(IWM)$ closed at roughly 2-year highs.
It’s understandable people are skeptical about this type of move, especially given how badly small-cap stocks have underperformed over the last 18 months. While the mid/large/mega-cap indexes celebrate new all-time highs on a daily basis, the popular Russell 2000 ETF is still 15% off its highs.
With the slowing momentum in large-cap stocks, could it be time for small-cap stocks to shine?
Fundstrat’s Tom Lee continues to pound the table on his “50% upside” thesis for this segment of the market.
Our top idea for 2024 is small-caps, where we see at least 50% upside ..
Russell 2000 companies are set to grow .. faster than the $SPX ..
Valuations are far more attractive ..
When CEO confidence recovers, we also see the low valuations as setting the stage for synergistic M&A ..
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Let's take a look at the constituents leading the surge in $IWM:
IWM tracks a market-cap-weighted index of US small-cap stocks. The index selects stocks ranked 1,001-3,000 by market cap.
The top 10 holdings include this year's hot semiconductor dark horse, $SUPER MICRO COMPUTER INC(SMCI)$, and the company most correlated with BTC, $MicroStrategy(MSTR)$.
Additionally, notable companies like $Marathon Digital Holdings Inc(MARA)$, $CleanSpark, Inc.(CLSK)$, $SoundHound AI Inc(SOUN)$, $Viking Therapeutics(VKTX)$ and $Recursion Pharmaceuticals, Inc.(RXRX)$ are also included in this ETF.
With the deceleration in large-cap stock gains, is it time for small-cap stocks to make their move?
What do you think about the potential further gains for small-cap stocks?
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