Small-cap stocks have emerged as diamonds in the rough pushing aside the large-cap stocks in 2018. The volatility which commenced in February has taken its toll on the large-cap stocks but small-cap have slowly achieved a milestone in the meantime. Russell 2000 (RUTX), the benchmark index of U.S. small-cap stocks, scaled an all-time high on May 16.
Strong fundamentals of the U.S. economy, massive tax-cut and business friendly policies adopted by the Trump administration along with immunization from external disturbances have raised these stocks’ popularity. At this stage, investment in the top-ranked U.S. focused small-cap stocks will be a prudent move.
Russell Achieves All Time High
On Wednesday, the Russell 2000 touched an all-time high of 1620.64 before closing at a record level of 1616.37. This represents a gain of 1% or 16.03 points in a single day.
Over the last three months, the Russell 2000 increased nearly 8%, outperforming the Dow 30, S&P 500 and Nasdaq Composite, which gained 1.5%, 3% and 6.8%, respectively.
Immune to External Disturbances
A major characteristic of small-cap stocks is that these are mostly immune to any international geopolitical disturbance or global economic fluctuations which are the primary reasons of volatility in the U.S. stock markets.
Notably, the lingering trade conflict between the United States and China led to the imposition of tariffs and retaliatory tariffs generating systematic volatility affecting mainly the large-cap stocks. To add to the woe, the United States – North Korea conflict may escalate in coming months. Moreover, geopolitical tensions in the Middle East are a persistent cause of fluctuations in large-cap stocks.
Domestic Economy Focused
One typical characteristic of small-cap stocks is that the United States is the main market for their products. The U.S. economy is currently on a strong footing. Both consumer and business confidence remains healthy.
Furthermore, the value of the U.S. dollar is rising for