The Russell 2000 Index (RUT), a crucial barometer for small-cap stocks, has been making headlines with its impressive rally. Investors are anticipating that the Federal Reserve's expected interest rate cuts will benefit smaller companies, which often carry higher debt-to-equity ratios. That's why the shift into small caps from mega-cap tech stocks began in July, driven by promising June inflation data that supporting the case for lower rates.
In particular, Morgan Stanley’s (MS) U.S. equity strategists recommend adding small-cap growth stocks to portfolios, anticipating that the rate cuts will favor these names over their value-oriented counterparts.
