Russell rotation: YTD market capitalizations swelling for small-caps

Written By Michael Gary Scott



Russell Rotations Reinvent Small Caps: Market Upheaval Unfolds

Shift in Market Dynamics

Small-cap stocks are on a meteoric rise, exemplified by Abercrombie & Fitch (ANF) and Insmed (INSM) in the Russell 2000 (RTY). The performance of these small-cap stocks has been nothing short of spectacular, with market capitalizations skyrocketing to unprecedented levels. This surge has been fueled by a notable shift in market trends away from large-caps like SP500 and COMP:IND, underscoring a rotation that is redefining the investment landscape.

Market Momentum

The Russell 2000 (RTY) has witnessed a resurgence, witnessing a 1.5% increase for the second consecutive week. Despite this impressive rally, the momentum has been tempered by recent fluctuations, highlighting the uneven nature of the current small-cap stock surge. The inflow of $9.9 billion recorded by small-caps funds in a single week marks a significant milestone, representing the second-largest weekly influx on record, as reported by Bank of America with data from EPFR.

Small-Cap Stars

Insmed (INSM), a prominent constituent of the Russell 2000 (RTY), has emerged as a small-cap star, demonstrating remarkable stock price surges and a notable increase in market capitalization. The biotech company focused on rare pulmonary diseases has soared to a market valuation of $11.3 billion year-to-date, a quantum leap from $4.3 billion recorded in 2023. Its shares skyrocketed by a staggering 145% so far, a stark contrast from the approximate 29% loss experienced in late May.

Capitalization Splurge

The iShares Russell 2000 ETF (IWM) showcases the remarkable uptick in market capitalizations of the top 10 stocks within the ETF universe. Companies like Insmed (INSM), FTAI Aviation (FTAI), Vaxcyte (PCVX), and others have witnessed their market caps ballooning, underscoring the bullish sentiment surrounding small-cap stocks. This surge signals a transformative period in the small-cap domain, propelling these companies to new heights of valuation and investor interest.

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Expanding Investment Universe

In addition to the Russell 2000 (RTY), various small-cap ETFs like IJR, VB, VBR, SPSM, and DFAS are garnering attention as investors seek exposure to this vibrant segment of the market. The allure of small-cap stocks shines brightly amidst this period of market exuberance, presenting investors with a newfound universe of investment opportunities teeming with growth potential and financial promise.