Russell 2000 on Track for Record-Breaking December

January 16, 2024 | by


The Russell 2000 index is poised to have its best December ever, surpassing its performance against the S&P 500 in the last 24 years. The Russell 2000, comprised of the 2,000 smallest companies in the Russell 3000, has experienced a strong rally this month, marking a significant turnaround from its lackluster performance earlier in the year. Currently, the index has surged 13.7% in December, outperforming the S&P 500 by a remarkable margin of 8.8%. This December rally serves as a stark reversal of the index’s previous trend and highlights its potential for a successful 2024. Despite this month’s surge, the Russell 2000 still lags behind larger indexes in terms of overall gains for the year. With a rise of 16.7% in 2023, compared to the S&P 500’s 24.8% and the Nasdaq Composite’s 44.5% increase, there is still room for growth.


Table of Contents

Market Performance

Small-cap stocks on track for best December in history

According to Dow Jones Market Data, small-cap stocks are on track to achieve their best December performance ever. The Russell 2000 index, which represents the 2,000 smallest companies by market capitalization in the Russell 3000, has surged 13.7% so far this month. This remarkable performance is a significant turnaround from the sluggish performance observed throughout most of the year.

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Small-cap stocks outperforming large-cap counterparts

In addition to their exceptional December performance, small-cap stocks are also outperforming their large-cap counterparts. The S&P 500, a benchmark index for large-cap stocks, has only risen 4.9% this month. This means that the Russell 2000 index is surpassing the S&P 500 by an impressive 8.8%, marking the largest margin since February 2000.

Russell 2000 index up 13.7% this month

The Russell 2000 index has experienced substantial growth this month, with its value increasing by 13.7%. This significant increase demonstrates the strength and resilience of small-cap stocks in the current market conditions. Investors who have allocated their portfolios towards small-cap stocks may benefit greatly from this surge in value.

S&P 500 up 4.9% this month

In comparison to the impressive performance of small-cap stocks, the S&P 500 has only risen by 4.9% this month. The S&P 500 consists of 500 large-cap stocks, and its performance is often considered a barometer for the overall market sentiment. The relatively lower growth in the S&P 500 suggests that large-cap stocks are not experiencing the same level of success as their small-cap counterparts.

Russell 2000 outperforming S&P 500 by 8.8%

The Russell 2000’s outperformance of the S&P 500 by 8.8% highlights the strength and potential of small-cap stocks in the current market climate. This considerable margin signifies the significant advantage that investors who have allocated their portfolios towards small-cap stocks may have over those focused on large-cap investments.

Largest margin since February 2000

The margin of outperformance by the Russell 2000 index over the S&P 500 in December marks the largest difference since February 2000. This historical context emphasizes the rarity and significance of the current market performance of small-cap stocks. Investors should take note of this exceptional opportunity in the market and consider the potential benefits of including small-cap stocks in their investment strategies.

Comparison with Previous Year

Russell 2000 lagged behind large-cap gauge earlier this year

In contrast to the current outperformance of small-cap stocks, the Russell 2000 index lagged behind the large-cap gauge earlier this year. This underperformance was a notable trend that affected the overall performance of small-cap stocks in the market. However, the recent rally in December has reversed this trend and brought small-cap stocks back into the spotlight.

Late-year rally still trails larger indexes

Despite the impressive late-year rally of small-cap stocks, the Russell 2000 index still trails behind the larger indexes in terms of overall performance. So far in 2023, the Russell 2000 has gained 16.7%, while the S&P 500 has seen a 24.8% increase. Furthermore, the tech-heavy Nasdaq Composite has experienced a substantial 44.5% rise over the same period. Although small-cap stocks have made impressive strides, they have yet to catch up to the performance of their larger counterparts.

Russell 2000 up 16.7% in 2023

The 16.7% increase in the Russell 2000 index in 2023 showcases the growth potential of small-cap stocks. Despite the initial lag behind larger indexes, the Russell 2000 has managed to make significant progress over the course of the year. Investors who have maintained their positions in small-cap stocks may have seen attractive returns as a result of this growth.

S&P 500 up 24.8% in 2023

Compared to the modest 16.7% rise in the Russell 2000 index, the S&P 500 has experienced a more substantial increase of 24.8% in 2023. Large-cap stocks have continued to demonstrate their dominance in the market, attracting a significant share of investor attention and capital. This gap in performance between small-cap and large-cap stocks further emphasizes the allure and potential profitability of large-cap investments.

Nasdaq Composite up 44.5% in 2023

The Nasdaq Composite, which focuses on tech-heavy stocks, has significantly outperformed both small-cap and large-cap stocks in 2023. With an impressive 44.5% increase, the Nasdaq Composite showcases the strong growth potential of certain sectors, particularly in the technology industry. Investors who have allocated their portfolios towards tech-related stocks may have reaped substantial rewards this year.

Russell 2000 on Track for Record-Breaking December

Current Performance

Russell 2000 down 0.5% on Thursday

Despite the overall positive performance throughout December, the Russell 2000 index experienced a slight dip of 0.5% on Thursday. This minor decrease may be attributed to various factors, including profit-taking by investors who have benefited from the previous month’s rally. However, this decline should not overshadow the significant growth that small-cap stocks have achieved over the course of the month.

S&P 500 up 0.1% on Thursday

In contrast to the slight decline in the Russell 2000 index, the S&P 500 saw a modest increase of 0.1% on Thursday. This indicates the resilience of large-cap stocks and their ability to maintain positive momentum even in the face of small setbacks. The steady growth of the S&P 500 further solidifies its position as a reliable indicator of market performance.


Nasdaq Composite up less than 0.1%

Similarly, the tech-heavy Nasdaq Composite experienced a minimal increase of less than 0.1% on Thursday. While this marginal growth may not be as substantial as previous gains, it showcases the consistent performance of tech-related stocks in the market. The ability of the Nasdaq Composite to maintain its upward trajectory highlights the resilience and attractiveness of the technology sector.

Analysis and Projections

Rally in small-cap stocks signifies a reversal of earlier trend

The rally in small-cap stocks, especially the impressive performance of the Russell 2000 index in December, signifies a significant reversal of the earlier trend witnessed in these stocks. After lagging behind larger indexes earlier in the year, small-cap stocks have made a comeback, demonstrating their potential for growth and value. This reversal of the trend could indicate a shifting market sentiment favoring smaller companies and their ability to deliver strong returns.

Potential reasons for the strong December performance

Several reasons may explain the strong performance of small-cap stocks in December. Firstly, market participants may be focusing on sectors that are primarily composed of small-cap companies, such as technology and healthcare. These sectors have shown remarkable growth potential, attracting investor interest. Furthermore, the increased availability of capital and favorable economic conditions could have facilitated the growth of small-cap stocks. Lastly, investors may have also been drawn to the potential for higher returns in smaller companies due to their agility and potential for innovation.

Forecasts for future performance of the Russell 2000

While it is difficult to predict the future performance of the Russell 2000 index with certainty, there are factors that suggest continued growth for small-cap stocks. The overall positive sentiment towards small-cap companies, combined with favorable economic conditions and sector-specific opportunities, could contribute to the continued success of the index. However, as with any investment, there are inherent risks involved, and investors should carefully analyze market trends and consult with experts before making investment decisions.

Russell 2000 on Track for Record-Breaking December

Impact on Other Markets

How the performance of small-cap stocks is affecting other indexes

The exceptional performance of small-cap stocks, particularly the Russell 2000 index, is having an impact on other market indexes. The outperformance of small-cap stocks compared to their large-cap counterparts has sparked interest among investors who may be considering reallocating their portfolios. As a result, there may be a shift in capital flow from large-cap stocks to small-cap stocks, potentially affecting the overall balance of the market.

Potential implications for investors and portfolio strategies

The success of small-cap stocks in December could have significant implications for investors and their portfolio strategies. Investing in small-cap stocks may offer opportunities for diversification and potential higher returns. While large-cap stocks continue to be attractive due to their stability and established track records, the recent surge in small-cap stocks suggests that investors should carefully consider their investment allocation and diversify their portfolios to include exposure to smaller companies.

Historical Context

Comparison of current performance to previous record-breaking months

To better understand the significance of the current market performance, it is essential to compare it to previous record-breaking months. By analyzing the historical context, market participants can gain insights into the rarity and potential impact of the current trends. This information can assist investors in making informed decisions and adjusting their investment strategies accordingly.

Similarities and differences with past market trends

While the current market trends are unique in their own right, they may share similarities with past market trends. By examining these similarities and differences, market participants can better understand the factors driving the current performance and potentially anticipate future market movements. However, it is crucial to note that past performance is not indicative of future results, and investors should exercise caution when making investment decisions based solely on historical patterns.

Factors Driving the Rally

Economic factors contributing to the success of small-cap stocks

Several economic factors may be contributing to the success of small-cap stocks in the current market. Favorable economic conditions, such as low interest rates and robust economic growth, can benefit smaller companies, allowing them to expand and thrive. Additionally, increased consumer spending and business investments can provide a strong foundation for small-cap companies to succeed. These economic factors, combined with investor optimism and growing confidence in the market, could be driving the rally in small-cap stocks.

Sector-specific influences on the Russell 2000 performance

The performance of the Russell 2000 index is influenced by the performance of specific sectors within the index. Sectors such as technology, healthcare, and consumer discretionary have shown significant growth potential and may be playing a crucial role in the overall performance of the index. Investors should consider sector-specific influences when assessing the potential for future growth and making investment decisions within the small-cap space.

Investor Sentiment

How investor sentiment is influencing the market

Investor sentiment plays a critical role in shaping the market. Positive investor sentiment can lead to increased buying activity, driving stock prices higher. In the case of small-cap stocks, the recent rally suggests a shift in investor sentiment favoring smaller companies. The belief in the growth potential of these companies, combined with favorable market conditions, can contribute to the continued success of small-cap stocks.

Potential risks and challenges for small-cap stocks

While small-cap stocks have shown remarkable performance, it is essential to acknowledge the potential risks and challenges associated with investing in these stocks. Smaller companies may face greater volatility and liquidity risks compared to their larger counterparts. Additionally, they may be more susceptible to external shocks and changes in market conditions. It is crucial for investors to carefully evaluate their risk tolerance and conduct thorough research before allocating their capital to small-cap stocks.

Expert Opinions

Insights from market experts on the Russell 2000 performance

Market experts provide valuable insights into the performance of the Russell 2000 index and the factors driving its success. Their analysis and perspectives can offer investors a deeper understanding of the current market dynamics and potential opportunities. It is advisable for investors to consult with experts and follow their informed opinions when making investment decisions.

Analyst predictions for the future of small-cap stocks

Analysts often provide predictions and forecasts for the future performance of small-cap stocks. These predictions are based on extensive research, market analysis, and industry knowledge. Investors can benefit from understanding these predictions to assess the potential risks and rewards associated with small-cap investments. However, it is essential to remember that these predictions are not guarantees and should be used as one of many factors in making investment decisions.


The Russell 2000 index’s extraordinary performance in December, coupled with its outperformance of the S&P 500, highlights the potential and attractiveness of small-cap stocks. This reversal of the earlier trend and the significant margin of outperformance mark a compelling opportunity for investors. However, it is crucial to consider the historical context, factors driving the rally, and potential risks and challenges associated with investing in small-cap stocks. By staying informed and consulting with experts, investors can make informed decisions and position themselves for success in the ever-changing market landscape.


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