Small-Cap Stocks Just Did Something They Haven't Done Since 2018. Is It Finally Time to Buy?

The Russell 2000 small-cap index ended a six-week losing streak, gaining 2% in the week ended Oct. 23—its first such recovery since 2018. The rebound was driven by falling Treasury yields below 5%, which disproportionately benefit debt-heavy small-caps. With small-cap earnings expected to grow over 20% year-over-year and valuations at 18x earnings, small-caps present an attractive opportunity. However, the outlook remains sensitive to interest rate movements, which could reverse gains if yields rise again.