Small American companies (Russell 2000) have their moments in the cycle when they outperform large companies (S&P500). Figure 1 shows returns since 2006, including the size of drawdowns (bottom panel).
The S&P500 increased by 447% (yearly +8.41%) during this period; while the Russell 2000 increased by 333% (yearly +6.69%).
Since 2019, the Russell 2000 has actually had one long period of beating the S&P500... right after the 2020 recession, as stock markets rebounded strongly after previously falling by more than 30%. See Figure 2 and 3.
In 2024, however, the Russell 2000 was flat from the beginning of the year until July 9, when the combination of corrections in big tech and the development of the so-called "Trump trade" led to the Russell 2000 rising by more than 10% in a few days - see Figure 4.
The next test of momentum for small companies is the currently published results for Q2 2024. And if the US economy continues to slow down in the following quarters, the results of small companies may be the first to suffer.
Figure 5 shows the monthly and quarterly returns of the S&P500 and Mag7. July is still positive for both (after exceptional May and June).
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