Russell 2000 small-cap index aims for the longest monthly win streak since 1995

Small-caps are on a tear in the post-pandemic phase recovery of this economic cycle.

The small-capitalization Russell 2000 index RUT has been up for eight straight months. The last time the index enjoyed that long a monthly win streak was 1995, when Batman Forever starring Val Kilmer, as the Dark Knight, and Jim Carrey, as the Riddler, ruled the box office.

Now, the Russell is clinging to a 0.4% monthly gain, at last check Thursday. That would mark its longest such streak in over a quarter-century. The index needs to finish above 2,266.45 on Friday, the final trading session of the month, according to Dow Jones Market Data.

Week to date, the Russell is set to outperform the large cap U.S. stock indexes with the Dow Jones Industrial Average DJIA, +0.41% up 0.7% thus far this week, the S&P 500 index SPX, +0.12% gaining 1.1% and the technology-laden Nasdaq Composite Index COMP, -0.01% climbing over 2%.

For the month, however, the Dow, up 1.7% in May, is set to outperform small-caps as industrials like Boeing Co. BA, +3.87% help power a rebound in blue chips. The Nasdaq Composite is down 1.5% in May, despite benchmark bond yields, which have lost some of their post-pandemic buoyancy.

Concerns about rising inflation and lofty valuations in segments of the market has pushed investors into areas like small-caps and industrials, which are considered more in the value end of the investment spectrum, an area that some investors are wagering will perform better in an economic rebound compared against growth tech and tech-related companies, which have been expanding earnings and revenues at a faster clip than other sectors of the market.

Small-caps are off about 3.5% from their March 15 record at 2,360.17, while the other main benchmarks are nearer their all-time records. The Nasdaq Composite is off 2.8% from its April 26 peak at 14,138.78, the Dow is off by about 1% from its May 7 record at 34,777.76, and the S&P 500 is off less than 1% from its May 7 record.

A surge in U.S. Treasury yields, however, could impinge upon this uptrend, analysts say, because rising borrowing costs could hurt small-cap businesses.

“The ‘re-opening’ trade stocks look promising for the next 2-3 weeks and it is worth buying pullbacks in Casinos, Cruiseliners and Airlines which all have similar technical patterns,” wrote Mark Newton, technical analyst at Newton Advisors, in a Thursday note.

Mark DeCambre

source:marketwatch.com