The Russell 2000, an index of 2,000 small-capitalization stocks, could be the next index to post a record high.
The small-cap benchmark is currently trading within 4.2 percent of its closing high of 865.29 set back in April. It has climbed 36 percent since its lows in early October. That compares to the Dow Jones Industrial Average, which hit 13,000 earlier this week for the first time since 2008, but is still 8.3 percent from its record high in October 2007.
Driving the Russell 2000’s recent surge are a handful of stocks posting gains of more than 150 percent since October.
One of the reasons for the index’s ascent may lie in the fact that small-cap stocks tend to be less affected by the global macro environment. In fact, these stocks may be running up as international investors seek a safe haven, with many of these companies generating their revenue from the U.S.
Another reason for the surge is that prices for these small-cap stocks tend to move more drastically than larger stocks because they are smaller, less liquid, and more sensitive to U.S. economic activity.
Will the rally last? Since the index’s late April/early May highs, individual investors have pulled money from U.S. small-cap equity funds in 37 of the past 41 weeks, according to EPFR Global.