The Russell 2000 is up 20% in the first half. Best performance since 1991. Financial experts declare the rally has legs.
1991 was thirty-five years ago. The Soviet Union still existed. Nevermind the Wall fell in '89, the whole country was still there. Your expert is comparing this rally to a time when people thoughtGorby was gonna turn it all around.
Small-caps rip for six months and every analyst with a Bloomberg terminal calls it sustainable. They said the same thing in February. And August. And November of last year when the index was down 8%. The difference now is they found a three-decade comparison that makes the headline sound like history instead of statistical noise.
Not a junk rally, they say. As if saying "not junk" has ever convinced anyone they weren't holding junk. It's the financial equivalent of starting a sentence with "I'm not racist but." You've already lost.
Retail traders are gonna read this headline and think they discovered small-caps. They didn't know the Russell 2000 existed until this morning. Now they're gonna dump their savings into ticker symbols that sound like pharmaceutical side effects. XBIO. FTEK. SAVA. Companies with market caps smaller than a Cheesecake Factory location.
The experts say the rally can keep running. They also said that about everything else that stopped running. Their job is to say things can keep going until they don't, then explain why they saw it coming. It's astrology for people who wear Patagonia vests.
The best part is calling 1991 a benchmark. The S&P 500 returned 30% that year. Small-caps outperformed in the first half then got demolished by December. But sure, let's use that as our comp. Really inspires confidence in the not-junk thesis.
Photo by Elliot Krueger on Unsplash
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