Russell 2000 index breaks six-week losing streak

The Russell 2000 small-cap index gained 2% during the week ending October 23, marking its first weekly increase following a six-week decline. This streak was the longest period of consecutive weekly losses for the index since 2018.

The index's performance diverged from major large-cap benchmarks, as the S&P 500 and Nasdaq 100 both experienced declines during the same period. Analysts suggest this shift may be driven by falling 10-year Treasury yields, which benefit small-cap companies that often carry higher debt loads compared to large-cap peers.

Additionally, changing investor sentiment regarding artificial intelligence financing and rising credit risks may be contributing to a rotation toward small-cap stocks. While small-caps have historically lagged due to weak earnings growth, projections now suggest small-cap earnings could grow by more than 20% year-over-year, potentially narrowing the valuation gap with large-cap companies.