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Small-cap stocks are generally companies with a market cap above $250 million, but below the $2 billion threshold. They usually consist of up-and-coming companies with rapid growth potential, which offer higher returns - but also carry greater risks than their larger, more established competitors.
Recently, investors have been rotating out of the Big Tech market leaders, while small-cap stocks have benefited from a wave of buying interest as Fed rate-cut expectations rise. The sudden shift has propelled the underperforming Russell 2000 Index (RUT), a benchmark of small-cap stocks, sharply higher over the past week.
