Russell 2000 Index – Top Companies, Charts & Price Outlook

The Russell 2000 Index is a stock market index measuring the performance of the smallest 2,000 companies in the Russell 3000 Index. Often considered a barometer of the US small-cap market, it provides investors with exposure to companies with relatively lower market capitalisations.

Unlike the Dow Jones Industrial Average, which is price-weighted, the Russell 2000 is market-capitalisation-weighted, meaning larger companies within the index have a greater impact on its overall performance. This index is widely used as a benchmark for small-cap mutual funds and exchange-traded funds (ETFs), offering investors a way to participate in the growth potential of smaller companies.

Russell 2000 Price & Chart 

The pandemic saw an initial dive in the Russell 2000 before a surge until November 2021. It then declined until the latter stages of 2023, when it started its recovery and moved back towards its previous highs (as of now, Q4 2024, it hasn’t got there yet).  

Russell 2000 Price Forecast

The Russell 2000 is a benchmark index representing the performance of small-cap US companies. While it offers exposure to dynamic and growth-oriented businesses, its future trajectory is influenced by various economic and market factors. Let’s examine the bullish and bearish arguments for the index.

The Bull Argument: In a January 2024 note, analysts at Goldman Sachs told investors that they believe the Russell 2000 small-cap index will deliver a return of around 9% over the next six months and 15% in the next 12 months. Meanwhile, in a July note, analysts at Bank of America stated: “Positioning, technicals, relative valuations and the Fed backdrop are supportive for further leadership by the Russell 2000, and we have been positive on the long-term case for small vs. large caps.” 

The Bear Argument: On the other hand, in May, BlackRock’s Head of iShares Investment Strategy, Kristy Akullian, said that the Fed’s “higher for longer” rate outlook was disproportionately weighing on smaller companies. In addition, analysts have previously highlighted concerns around debt levels when it comes to small-cap stocks, especially with US interest rates remaining elevated. 

Who Should Buy the Russell 2000

The Russell 2000 is composed of smaller US companies, offering a different investment profile compared to the larger, more established firms. As a result, some will be more suited to investing in the index than others. Here are the investing characteristics that may be necessary to successfully invest in the Russell 2000:

Growth-Oriented Investors: Small-cap companies often exhibit higher growth rates than their larger counterparts, making the Russell 2000 attractive to investors seeking substantial capital appreciation. However, they should also be aware that this comes with increased risk.

High-Risk Tolerance Investors: Following on from the above point, investing in small-cap stocks carries inherent risks, including higher volatility. Therefore, the Russell 2000 is suitable for investors with a higher risk tolerance.

Long-Term Investors: The index can be a core holding for investors with a long-term investment horizon, as small-cap companies have historically outperformed large-caps over extended periods. According to the CFA Institute website, “large caps across different economic cycles. Small caps outperformed large caps by an average of 66 basis points (bps) and 493 bps during recovery and expansion regimes, respectively.”

Diversification Seekers: Adding the Russell 2000 to a portfolio can help diversify holdings beyond large-cap stocks, reducing overall portfolio risk.

Disruptive Technology Investors: Many innovative and fast-growing companies start small, making the Russell 2000 a potential hunting ground for investors seeking exposure to disruptive technologies.

Trading The Index

There are various ways to take a position on the small cap index, with one of the more popular proving to be the IWM ETF. For those looking to hedge volatility, or expecting big changes in the index, the Russell 2000 has it’s own volatility index, the RVX that works in a similar way as the VIX does for the S&P 500, and can provide such exposure.

Russell 2000 Top 10 Companies

The index is rebalanced every year on the fourth Friday of June.