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U.S. Small-Cap Rally Sends Valuation 26% Above 1990s

In one corner of the U.S. equity market, investor enthusiasm is exceeding the frenzy of the Internet bubble.

Small-cap shares tracked by the Russell 2000 Index have rallied for seven straight quarters, the longest stretch ever, sending valuations 26 percent above levels at the height of the 1990s rally. Gains in stocks from LogMeIn Inc. to Athenahealth Inc. have pushed the gauge up 248 percent since the bull market began five years ago, leaving price-earnings ratios about three times as high as for shares in the Standard & Poor’s 500 Index.