Russell Index Forecast
Russell Small Caps 2025
Stock market analysts and market economists have been talking about a market broadening for some time. The gist of their forecasts revolve around investment flows into small caps, which are fundamental to the Russell 2000.
The Russell 2000 Index provides valuable insights into the overall health and trends of the stock market itself and with the broadening out of investment into small caps, it’s wise to begin investigating the stocks you need to buy.
Which means, some (e.g., Tom Lee forecast) are forecasting Russell small caps could double in value in the next year. The small caps still aren’t getting the attention they deserve because a number of issues haven’t been put to bed. Interest rates remain high, President Trump still has formed his cabinet nor created his new policies to be passed into law.
And large caps such as Googl, Nvidia, Meta, and other Mag 7 level stocks are doing well, and seem much safer for the time being. So the money flows haven’t rushed in just yet. So this is an exciting opportunity for you to identify some promising small caps to buy.
High interest rates cripple the earnings performance of small caps and small cap stock prices and the US Fed hasn’t quite lowered the FED main lending rate sufficiently yet to ease the pressure on smaller companies. And America’s small businesses as well, continue to face tough conditions. It may not be till spring 2025 that we see better conditions for all.
However, stock prices are valuations of future value and the Russell 2000 index trend upward with the additional Trump trade boost, shows investors are buying into the idea that small caps might be the best bet for 2025.
Today, the RT tied its all-time high level at 2434.98.
We have some history to review too. The Russell rose 60% during President Trump’s term in office, up to the Covid pandemic collapse. There is no reason to believe even better growth isn’t ahead for 2025 and for the next 5 years.
Why Would Money Rotate into Small Caps?
The reasoning for the Russell 2000/3000 small-cap hype is due to the expectation of lower interest rates which would benefit small businesses who would see lower financing costs. And of course, small business customers would have more to spend thus driving higher revenues for SMBs.
With rates falling, the economy okay, unemployment acceptable, it’s deemed a goldilocks scenario. Higher inflation is not expected, so this makes investors and analysts a little more optimistic that the recession is nearing its end.
Investors believe a broadening of the stock market will happen and that investors will sell their S&P megacaps and buy small caps. It means the price of Amazon, Google, Microsoft, Tesla, Netflix, Apple and others might fall drastically. Since those stocks make up most of the S&P and NASDAQ, we’d expect the outflows would lead to a drastic decline.
However, the forecasts for the S&P small caps are rosy too. Investing in small caps entails some risk such as:
- volatile prices due to lower capitalization and lower prices
- high risk due to lower capital reserves and need to borrow from credit markets
- exposure to foreign supply chains
- less liquid because fewer investors know about them and are willing to buy them
Best Russell 2000 Stocks to Buy?
Bitcoin jumped to a record high today at $86,000 and it shouldn’t be a surprise that cryptocurrency companies (i.e., bitcoin stocks) are leading the way in the Russell index. As you can see in this Barchart top small caps of the day chart, Microstrategy and Coinbase lead the way, along with the new surprising upstart, Affirm Holdings. Affirm, a buy now pay later payment platform is big news.
Top Performing Russell 2000 Stocks (Barchart)
From the RT 2000 group, it’s a good range of companies that have seen their stock price rise. Here Barchart shows growth in the last month with Bioscience stocks leading the way.
Validea offers its best Russell 2000 picks:
Growth of the Russell 2000 as you can see rivals that of the S&P in the last 3 months. The Dow Jones has lagged as well, which sets up an interesting combination with the small caps if you can find those stocks that will benefit when manufacturing returns. As this chart from Yahoo Finance shows, shows the Russell is back leading the pack. With lower interest rates and a flood of money coming in from the money markets and foreign investors, it’s difficult not to see the Russell doubling. Of course, the timeline is anyone’s guess, based on politics.
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.
The Russell 2000 index (US Small Cap 2000) is a the leading global index in the US, created in 1984 by the Frank Russell Company, which is part of the London Stock Exchange.
The chart below shows the sector weighting of the Russell 2000. Health Care, Financials, Info Tech and consumer discretionary stocks are favored. Industrials, energy, and materials are gaining ground of late. Small cap stocks in these sectors may be ideal.
NASDAQ.com cites 3 companies worth a look: iRobot,
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.
See more on the outlook for the best stock market sectors and in-depth views of critically important market data and news.
* investing in stocks entails risk. Ensure you’re well informed before buying any serious amount of funds into small caps or mega caps. Stock prices vary by day and month and individual companies may suffer unforeseen setbacks. Read more on the 6 month, 5 year and long term outlooks to get a broader look at where markets are headed.
