I reiterate a buy rating on VTWO due to its reasonable valuation, strong technicals, and positive long-term trend despite recent market volatility. The Fed's anticipated rate cuts could benefit small-cap stocks like those in the Russell 2000, which are more debt-burdened and sensitive to interest rates. VTWO offers diversification with a slight value tilt and sector spread, making it a strong core position for long-term investors.
Tom Lee of Fundstrat Global Advisors has made a string of accurate market calls over the last couple of years. He still believes in the potential of small cap stocks, predicting a 50% return in the Russell 2000 index this year.
Small-cap stocks are trading for their lowest valuations relative to large caps in a quarter-century. The Russell 2000 is a broad index of small-cap stocks, and there's a low-cost Vanguard index fund that tracks it.
The Russell 2000 is a widely followed benchmark index that tracks approximately 2,000 of America's smallest publicly listed companies. The index has experienced a significant surge in value, gaining 10.3% since the beginning of July compared to the S&P 500, which has remained flat since the same date.
The Russell 2000 index is up 10.3% in July, crushing the S&P 500, which is trading flat. Investors are betting on three interest rate cuts later this year, which will benefit small companies more than their larger counterparts.
Tom Lee at Fundstrat Global Advisors believes the small-cap Russell 2000 could advance 40% by the end of the summer. Small-cap stocks dramatically underperformed large-cap stocks during the last decade, but economic and political catalysts could give small-cap companies an edge in the near-term.
Designed to provide broad exposure to the Small Cap Blend segment of the US equity market, the Vanguard Russell 2000 ETF (VTWO) is a passively managed exchange traded fund launched on 09/22/2010.
Small caps are finally starting to turn around. Here's what is driving the move and why it could be just the beginning.
Tom Lee of Fundstrat Global Advisors is coming off a string of successful stock market predictions this past year. Lee currently has his eye on small-cap stocks, calling for the Russell 2000 index to soar 50% in 2024.
There was a massive valuation gap between large and small cap stocks at the start of the year, and it has widened even further. The last time small caps traded at such a relative discount was during the dot-com boom.
Tom Lee of Fundstrat Global Advisors thinks the small-cap Russell 2000 index could surpass 3,000 this year, which implies 49% upside from its current level of 2,014. Small-cap companies usually benefit from interest rate cuts more than large-cap companies because they carry more floating-rate debt.
The Russell 2000 Index has been a poor long-term investment due to the method by which it is re-constituted. For the past 25 years, the Russell 2000 Index has exhibited lower returns and higher standard deviations in the months of May–August. Vanguard Russell 2000 Index Fund ETF Shares tracks the Russell 2000, and it has significantly outperformed other similar ETFs Year to Date, and over the past month. Holders should use this as an opportunity to sell.