Russell 2000 reaches record high as rate-cut hopes lift US small caps

Sept 18 (Reuters) - The Russell 2000 index of small-cap U.S. companies touched an intraday record high on Thursday, the latest stock gauge to rebound from its April slump fueled by President Donald Trump's tariff policy.

The index .RUT eclipsed its previous all-time high of 2,466.49 points, hit on November 25, 2024, and was last at 2,466.86. It was set to surpass its record close of 2,442.74 points reached more than three years ago.

The index has recovered about 42% from its April 7 low when worries about Trump's sweeping tariffs rattled global markets and sparked a sell-off in risky assets.

"Small caps have underperformed pretty dramatically over the last decade or so and catch-up trade seems to be underway... we see the environment that we are in, being conducive for the rally in small caps to continue," said Keith Buchanan, senior portfolio manager at Globalt Investments.

The index has rebounded, along with the benchmark S&P 500 index .SPX and the blue-chip Dow index .DJI, as the limited pass-through of tariffs on the U.S. economy and deals with major trading partners eased investors worries.

Expectations of the first interest rate cut of the year by the Federal Reserve had also bolstered the recovery.

Investors now expect the Fed's 25 basis point cut on Wednesday to add fuel to the rally as small-cap companies are more reliant on debt financing and tend to perform better in a lower interest-rate environment.

Buchanan also said Trump's sweeping tax cut bill, passed by the Senate in July, will also support domestically driven small caps more than multinational corporations.

The Russell 2000 index has gained about 10.6% so far this year, underperforming the benchmark S&P 500, which has gained about 12.9%.