Small-cap stocks can make a smart holiday gift for investors, and now looks like the time to buy the dip, according to BTIG. The small-cap Russell 2000 seems to be running out of steam as the end of the year approaches, with the index down nearly 3% in December. However, BTIG technical strategist Jonathan Krinsky said in a note to clients that the recent dip for small caps fits well into a historical pattern that often includes a rally around the start of the new year. “‘Tis the season for small-caps historically, with mid-December weakness turning into strength into mid-February. It’s also the part of the calendar when small-caps tend to begin to outperform large-caps,” Krinsky said. .RUT 1M mountain The Russell 2000, a benchmark index of small cap stocks, is down in December. Small-cap stocks have had several strong periods throughout 2024, but they have proven to be short-lived. The Russell 2000 is still underperforming the S & P 500 and Nasdaq significantly year to date. And in recent weeks, the market has reverted back to the narrative of the early days of this bull market. Leadership has been narrow, and mainly in the form of Big Tech stocks, while the broader market struggles. However, the shift doesn’t mean that the historical pattern for small caps will be broken this year, according to Krinsky. “Every day in December has seen negative S & P 500 breadth, surpassing the modern record seen during 9/11. The equal-weight RSP has closed below the open every day this month, and small-caps continue to struggle. Despite these record runs of awful breadth, small-caps are bent, not broken,” he said.
‘Tis the season for small caps starting right now, says BTIG