Small-Cap Russell 2000 Index Hits All-Time High

On May 26, the Russell 2000 index of small-cap securities closed at an all-time high alongside both the technology-heavy Nasdaq (NASDAQ: $NDAQ) and benchmark S&P 500 indices.

In fact, the Russell 2000 was the biggest gainer on the day, rising 1.79% to close at a record 2920.54.

So far in 2026, the Russell 2000 is up 16% and outpacing all other major U.S. stock indices.

The S&P 500 has gained 10% on the year, while the Nasdaq Composite has risen 14%. The blue-chip Dow Jones Industrial Average has gained 5% year-to-date.

The rally in small-cap stocks is a sharp reversal for the sector after lagging for the better part of a decade.

Small-cap stocks are typically viewed as companies whose market capitalization is below $10 billion U.S.

Prominent small-cap stocks include The Gap (NYSE: $GAP), BlackBerry (NYSE: $BB), and Riot Platforms (NASDAQ: $RIOT).

Analysts say the Russell 2000 continues to scale new heights as a growing number of investors look for stocks outside the artificial intelligence (A.I.) trade.

Many small-cap stocks have lower valuations compared to high-flying tech stocks and are viewed as cheaper options by investors.

Analysts also say the Russell 2000's current rally is being driven by a massive catch-up trade after a decade of underperformance.

How long the rally lasts remains to be seen. Some analysts are warning that small-cap stocks could be hurt if interest rates rise later this year and in 2027.

Because smaller companies tend to borrow more money to fund their operations, they tend to be sensitive to interest rate movements.

With rising oil prices sparking an increase in inflation, Wall Street is now expecting central banks around the world to respond with higher interest rates.

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