Small-Cap Stocks Expected to Outperform Amid Market Shifts

Small-Cap Stocks Expected to Outperform as historical data suggests that the Russell 2000 could perform better than the S&P 500 in the coming years. This could influence investor strategies and stock preferences significantly.

Date: 25-01-2025

AI Rating: 7

**Market Performance Trends**

The report highlights the historical performance of the Russell 2000 compared to the S&P 500, especially in the context of presidential elections. It notes that the Russell 2000 has outperformed the S&P 500 83% of the time in the 12 months following these elections.

The data indicates that the Russell 2000 returned an average of 18% following presidential elections, while the S&P 500 reported a more modest average return of 12%. This trend may suggest potential gains for investors focusing on small-cap stocks in the near future.

**Economic Factors Influencing Small-Cap Stocks**

It’s mentioned that the Russell 2000's relative success could be attributed to its lesser exposure to international revenue. This factor is particularly relevant given the current climate of increasing tariffs and a stronger U.S. dollar. Analysts point to President Trump's proposed tariffs and the rising strength of the dollar as catalysts for the expected outperformance of small-cap stocks.

**Investment Opportunities**

The report suggests that investors could benefit from the anticipated outperformance by focusing on instruments like the Vanguard Russell 2000 ETF. This investment could align with the historical trends noted which emphasize the strength of small-cap stocks post-presidential elections.

Stocks: VTWO