LIVE MARKETS-Small caps standing tall

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SMALL CAPS STANDING TALL

Small caps have kicked off the year demanding some attention.

Whether it's just the "January Effect," where stocks, particularly small caps, benefit from new year optimism in the wake of December weakness as a result of tax-loss selling, remains to be seen.

That said, strength in small caps so far this year has been noticeable.

The Russell 2000 .RUT ended Wednesday at a record closing high. Although early in 2026, the small cap index has now posted seven record closing highs so far this year vs. nine for all of last year. The S&P 500 .SPX has notched three record closes so far this year, while the Dow .DJI has scored four. The Nasdaq Composite .IXIC has zero record closes so far this year.

To kick off the year, the RUT is now up 8.7% in January. This compares to a 2.1% rise for the Dow, a 0.4% gain for the S&P 500, and a 0.1% drop for the Nasdaq.

The RUT's monthly gain so far has it on pace for its best start to a year since 2023 when it rallied 9.7% in January. With the current 8.7% rise, the index is on track for its eighth-best start to a year since 1979, and its fourth-best since 2000.

Meanwhile, the RUT's relative performance this year has been eye-catching. On Wednesday, the RUT/SPX ratio rose for a 13th straight day, matching a 13-day stretch of small-cap outperformance that ended in June 2008.

Using LSEG data back to 1979, the longest such streak of small-cap outperformance in history was a 16-day run that ended in May 1996.

(Terence Gabriel)

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