It had been off the radar for two years. And here it is returning in its most dazzling form to Wall Street, ousting even the top indices of Nasdaq and S&P500: it is the index Russell 2000, considered the benchmark for US small and medium-sized businesses to which he returnedinterest of investors. And it has returned for at least two reasons: on the one hand in the wake of the prospects of a drop in rates, on the other after the possibility of a Trump victory in the next US presidential elections is emerging.
In the last 18 months on Wall Street theenthusiasm generated by AI got the better of the odds. However, in a context of inflation slowing down, the US mid-cap companies I am in the optimal location to make the most of the positive effects of the Federal Reserve's rate cut. And now the managers are selling technology shares with one hand and buying the entire NYSE list with the other.
Russel 2000 rises to 2-year highs, while US tech prices fall
It is from the beginning of July, in particular from the week of 8 to 12 July, that the mid&small caps sector Americans has changed gear, suddenly finding a strong dynamism and investors, until then dedicated almost exclusively to the pursuit of champions of artificial intelligence, they are back in force. In that week theThe Russell 2000 index gained 6%. maximum of 2 years, while the tech-dominated Nasdaq 100 lost 0,3%. While yesterday the index saw a reversal (-1%) to 2.239,67, it still performed better than Nasdaq (-2,77%) And the S&P500 (-1,4%). In any case the Russel 2000 shows a increase of 7,59% in the last 5 days and 10,59% in the last month.
Falling inflation and rate cuts will help US Mid&Small caps
A trigger the movement last week, according to various analysts, was the new data onCPI inflation of the United States in June: it recorded a decline of 0,1%, while the consensus had expected an increase of 0,1%. For the Russell 2000 it was a lifesaver. Furthermore, the data has strengthened the expectations of a US rate cut: the market now puts a 97% chance that the Fed will cut interest rates for the first time at September, with further cuts expected later. The small and medium-sized companies, more concentrated on the US domestic market and forced in the last two years to make ends meet in a situation of restrictive monetary policy, are seen as the main beneficiaries of the next easing of credit conditions, Websim analysts say.
Trump slogans seen as boost for smaller businesses
American mid and small caps also seem destined to have the greatest advantages from the latest news on the US political scenario, with Donald Trump now given a great advantage over President Joe Biden. According to a study by Goldman Sachs, Trump's slogans that point to revival of American businesses they predict that his return to the White House will favor stock prices small capitalization companies.
Trend of the Russell 2000 index still seen upwards: target level of 2.500
After the highs of recent days, technical analysts see confirmation of a trend destined to continue. Push signals came with full violation of area 2.100, confirmed at the end of last week. The movement includes a short-term target of 2.295 points, but the bullish movement could expand towards the absolute tops of 2021 in area 2.457/2.500 points (potential upside +17%). The index will likely encounter significant resistance near this level, technical analysts say. During retracements, the index may retest the trend line near 2.080 points.
