Bullish momentum, expanding breadth, and a dovish Federal Reserve board are three reasons for investors to remain bullish stocks into year-end.
The stock market has surged over the last two years, driven by the artificial intelligence (AI) boom, falling inflation, and a resilient economy in the face of high interest rates.
The iShares Russell 2000 ETF (IWM) continued its strong rally, reaching a record high of $244.8 this week. It has jumped by over 51% from its lowest level in 2023 as the American economy avoided a hard landing.
ETFs pulled in $45 billion in capital last week, with U.S. equity ETFs leading the way.
We're certainly seeing some selling pressure as markets cool off, with the latest rally taking a breather amid signs of profit-taking.
Wall Street's main indexes and several of the street's individual favorites like Palantir and NVIDIA soared to record highs following Donald Trump's victory in the 2024 U.S. presidential election, a dramatic return to power after his defeat in 2020. Investors responded with optimism to the prospect of a president known for pro-business policies, including tax cuts and deregulation, despite potential concerns around tariffs and rising deficits.
The presidential election for the United States, probably one of the most awaited events and catalysts in the stock market for the year, is now over and Donald Trump is the President-Elect. The market and different participants have now taken on their views as a conclusion from the results, and it looks like most cyclical names will be in play for investors to consider.
If you're interested in broad exposure to the Small Cap Blend segment of the US equity market, look no further than the iShares Russell 2000 ETF (IWM), a passively managed exchange traded fund launched on 05/22/2000.
Despite the gap between small and large caps widening slightly since my last article discussing their trajectory, I believe that the trade is still on. Small caps are losing volatility and grinding slowly upwards, a good sign for a potential for a breakout. Breaking out may require positive data from the Fed and the economy overall.
IWM is approaching the 2024 high and has a good chance of continuing higher. A strong economy and an aggressive Fed cutting cycle would be ideal for IWM, but they are not mutually exclusive. It may be better off with neither. The current backdrop is generally positive. A slow but stable economy and slow easing cycle from the Fed should lead to a slow but steady rally.
The recent rally in the S&P 500, which hit its 45th record close of 2024, is more inclusive than in previous months. While banks and financials have led this broader market rise, small caps are also catching the attention of analysts.
As interest rates keep moving lower from here, it makes sense to diversify your portfolio beyond the market's biggest and brightest.