Russell 2000 All Time High
Recently, the Russell 2000 (RUT) index reached an all-time high. The Russell 2000 is comprised of small U.S companies. Although this small cap sector lagged large multinational companies last year, it is now breaking out into uncharted territory. So what is causing this? Last year, investors believed multinational companies would benefit more from the pickup in the global economy. Now, those same companies are at risk because of the potential of trade disputes, mostly with China. Although, we do not think a full-blown trade war will occur, negotiations are currently taking place. Therefore, investors may have concerns and are looking for other areas to invest. Investors may be moving money into small cap companies because their business has less global risk. According to a recent research note from Bank of America Merrill Lynch, the S&P 500 gets 30% of its revenue from business overseas compared to 21% for the Russell 2000. Hypothetically, earnings for s...