Small-Cap Stocks Surge 22% in First Half, Marking Strongest Start Since 1991

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2▲4 ▼0Impact / 5
Summary · why it matters

Small-cap stocks posted a blistering performance in the first half of this year, with the Russell 2000 Index surging 22% through June, its strongest first-half performance since 1991. The index beat the NASDAQ by 9%, its biggest first-half outperformance since 2001, according to the Wall Street Journal. Small caps benefited from a resilient economy, rising earnings, supportive trade policies, infrastructure spending, and reshoring initiatives, while enthusiasm around AI beneficiaries within the small-cap universe also helped lift the indexes. The top-performing companies came from the AI, semiconductor, space, nuclear energy, quantum computing, and biotech sectors. After the Russell indexes rebalanced at the end of June, all 25 of the best-performing Russell 2000 constituents, each having gained at least 250% over the past year, moved into the Russell 1000, according to Bespoke. Looking ahead, potential Federal Reserve interest rate hikes due to elevated inflation could pose headwinds for smaller companies, which often carry heavier debt burdens with floating interest rates and have less access to the bond market. Since its inception in May 2000, the iShares Core S&P Small-Cap 600 ETF has returned more than 1,170%, compared with about 812% for the iShares Russell 2000 ETF, a performance gap largely stemming from the S&P SmallCap 600's built-in profitability requirement, though the Russell 2000 has outperformed over the past year as many companies tied to quantum computing, nuclear energy, and AI are not yet profitable and are excluded from the S&P SmallCap 600.

Impact on assets 5

Artificial Intelligence▲ · 2 stocks
Credo Technology Group Holding Ltd
CRDO
▲ PositiveDemandrelevance

Credo Technology is in the AI and semiconductor sectors, which are highlighted as top-performing areas benefiting from AI enthusiasm.

Sterling Infrastructure, Inc.
STRL
▲ PositiveDemandrelevance

Sterling Construction is in the infrastructure sector, which benefits from infrastructure spending and reshoring initiatives mentioned.

Energy Transition & Power Demand▲ · 1 stocks
Bloom Energy Corp
BE
▲ PositiveDemandrelevance

Bloom Energy is in the nuclear energy sector, which is mentioned as a top-performing sector benefiting from AI enthusiasm and reshoring initiatives.

Digital Finance & Tokenization▲ · 1 stocks
Terawulf Inc
WULF
▲ PositiveDemandrelevance

Terawulf is in the nuclear energy sector, which is mentioned as a top-performing sector benefiting from AI enthusiasm and reshoring initiatives.

Climate Adaptation & Water▲ · 1 stocks
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