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Ben Carlson

Why Small-Cap Stocks Are Finally Rallying

Caution: These equities exhibit higher volatility than large caps because they are riskier businesses.
Make room for the little guy.

Make room for the little guy.

Photographer: Michael Nagle/Bloomberg

In the month after the U.S. presidential election, small-cap stocks rallied hard, gaining more than 16 percent from early November to early December. Then they went nowhere for the next nine months as the Russell 2000 Index was actually lower by the end of August than it was on Dec. 9, 2016.

After this period of consolidation, when almost every other equity market on the globe showed large gains, small-cap stocks have finally decided to join the party. They have broken out with a number of all-time highs in recent weeks. After a slow start to the year, the Russell 2000 is up more than 10 percent compared with a gain of almost 14 percent gain for the S&P 500.