Russell Index 2000 Forecast
Russell Index Forecast
The Russell Index 2000 perhaps spectacularly in the last 6 months. The index has outperformed the S&P, NASDAQ and Dow Jones.
Is going to be an even better year for the small caps on the S&P, NASDAQ, and Russell Index? The fear was that the Feds stimulus would lag, vaccines would be slow, interest rates might rise, and Covid 19 would surge again.
The dangers still persist, however, stimulus is flowing and may flow more in the years to come (infrastructure spending) and vaccination has moved forward very fast. Already, airlines are back to near normal. Retail, tourism, leisure, restaurants, and more are making comebacks this spring. Small caps on the Russell 2000 are looking good.
Small caps on the Russell 2000 Index are stocks that have between $300 million and $2 billion of market capitalization. These are fairly large companies, just not the Tesla, Google, Apple and Amazon stocks most investors are obsessed with.
Here’s your introduction to the top performing Russell 2000 stocks of late. 11% to 23% gains is not bad.
Jefferies’ Steven DeSanctis believes the Russell 2000 small-cap index could gain 12.5% in 2021 to reach 2050. He predicts the Russell will improve based upon:
- recovering GDP
- increased M&A activity
- strong earnings
- a weaker US dollar
He’s missed out on the most obvious and key factor, that small businesses who have been forced to close, will once again be open. And many more new small businesses will be launched into the new economy, boosted by personal savings and stimulus funds. With the Federal government as the market hedge, SMB owners will gain confidence.
However, as the bull run continues and stocks are overbought and overvalued, the spectre of a stock market crash is real. The Russell index might be the canary in the mine, so keep an eye on them.
Because large caps have gotten their fill of stimulus money, there will be political pressure to help out small business in 2021.
One advantage of buying small caps is that there are fewer shares and often lower stock prices. You can own them and you’ll own more of a company. The key possibility is that one of these companies will hit it big. And it could small caps in just about any sector from energy to IT to travel.
With the end of the pandemic in view now sometime in late 2021, the world will be changing. The euphoria will create big wins for some companies. And of course, the upside for small companies is much higher. Keep in mind small businesses will be bought up, or gone out of business, or find themselves owning a new niche market.
Screenshot courtesy of Google Finance.
Russell 2000 Index
Heading into 2021, the Russell 2000 index is the hottest thing in the stock markets. It’s time to explore which stocks you should be investigating.
This compares nicely to large caps on the Dow Jones or S&P (e.g., Fang stocks) where you can’t buy many shares and the upside per share doesn’t look so good.
The Post Corona Virus Economy
Economists believe that we’re on the verge of a new consumer and business marketplace in 2021. We’re not out of the pandemic, but investors must look ahead at what will happenin 2021. There’s a shift coming back travel, airlines, hotels, big entertainment, restaurants etc. The Corona Virus stock prices will drop and the new post-pandemic stocks will rise.
It’s wise to begin your investigation and target the stocks you’re going to buy. Airlines and hotels for instance are already growing in price.
This means a big shift to online business and some of these small caps have better balance sheets and are ready to evolve into this new sales environment.
One more characteristic that may support small caps, is government action against the monopolies. It doesn’t seem like there is an appetite for tackling the monopolies including Google, Facebook, Apple, Microsoft, Amazon, Oracle, and other Faang level stocks.
But at some point, the US government and other governments will have to protect their economies from these market controlling companies. It’s only a matter of time as protectionism sentiments grow.
Such a move to put competition back into the market would definitely give small businesses a big opportunity to grow. Some of them will be very investible. The Russell 2000 index has 2000 of the best of them.
When the next stimulus bill is passed and money is distributed to small business (the target apparently) it will create huge interest in the Russell.
What is the Russell 2000 Index?
The Russell 2000 index is a gauge of the 2000 smallest market cap stocks in the Russell 3000 index. There is also a Russell 1000 index. The 2000 index seems to be a better gauge of the real economy and of how small businesses are faring.
In this video, the Motley Fool’s Brian Richards talks about why Russell Index stocks might be a wise choice in general. And currently, these stocks might offer the best stock price growth potential.
Russell Index Top Gainers
The whole point to investing in the Russell Index stocks, is to find individual company stocks that will be in need in the post covid period, and will survive this recession.
The chart above from Barchart.com is viewable at: barchart.com/stocks/indices/russell/russell2000
Which Small Caps Should you Buy?
Since you’re not a stock market expert, a safer way to benefit from the Russell’s meteoric rise, could be in iShares. You can learn more about the iShares Russell 2000 Index at the Motley Fool.
The Battle with Covid 19 Isn’t Over
The stock market outlook is optimistic for 2021. But as I mentioned last May that the Corona Virus pandemic is far from over. The second predicted fall and winter season surge has come true. We thought it might knock stock prices down, but politicians have not shut down businesses and the economy didn’t falter.
Now unemployment is on the rise and GDP is falling. New shutdowns could send the Dow, S&P, NASDAQ and the Russell Index back down. The forecast for the next 3 to 6 months is good however, however until the stimulus money is distributed, the markets could see a downturn correction and perhaps afterward as the bubble is too big.
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