Big Gains From Small Stocks Power Russell 2000 Surge

The article below was posted in the WSJ overnight, suggesting profitability gains for smaller US companies under a Biden Administration. This is good news for CD2 shareholders.

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Big Gains From Small Stocks Power Russell 2000 Surge

Investors bet rebounding economy will boost profits at smaller companies

By
Paul Vigna
Nov. 15, 2020 12:00 pm ET

Shares of small companies are posting outsize gains, driven by investors’ bets that a rebounding economy and expected Biden administration policies will boost profits at smaller U.S. companies.

The Russell 2000 index of small-company stocks rose 6.1% last week, hitting its first record close since 2018 and extending a recent race ahead of other major indexes. It finished the first two weeks of November up 13%, its best 10-session start to a month on record, according to Dow Jones Market Data. The broader S&P 500 gained roughly 9.6% in that period.

That marks a reversal from earlier in the year, when shutdowns hammered shares of small-cap companies, which tend to have fewer business lines and a greater reliance on the domestic economy than larger, diversified peers. The Russell 2000 lagged behind the market rebound and has now gained roughly 4.5% in 2020, according to FactSet data, compared with 32% for the Nasdaq Composite and 11% for the S&P 500.

Shares of giants including Apple Inc. and Amazon.com Inc. drove much of that bounce from March’s lows, lifted by bets those companies would benefit from consumers staying home in greater numbers. While Amazon, with its $1.6 trillion market value, is the biggest stock in the S&P 500’s consumer-discretionary sector, Penn National Gaming Inc., a roughly $10 billion operator of racetracks and casinos in 19 states, was the Russell 2000’s largest consumer-discretionary company as of Oct. 31.

Hopes for a Covid-19 vaccine, however, have upended that trade in recent sessions, sparking a recovery in sectors such as energy, travel and entertainment. In the two sessions after Pfizer Inc. and partner BioNTech SE announced significant progress on a vaccine for Covid-19, the Russell 2000 beat the tech-heavy Nasdaq Composite by 8.52 percentage points—the greatest margin since at least 1986, according to Dow Jones Market Data.