Russell 2000 Posts Best First Half Since 1991, Up 22%

The Russell 2000 index of small-cap stocks has just finished its best first half of a year since 1991, surging 22% compared to the S&P 500's 10% gain over the same period.

Weekly Market Performance

For the week ending July 2, 2026, major indices posted positive returns:

• S&P 500: +1.8%
• Nasdaq: +2%
• Dow Jones: +2.1%

The Russell 2000 dipped slightly for the week but retained its strong year-to-date gains.

Reasons for Outperformance

Analysts attribute the small-cap outperformance to a shift in portfolio manager focus. Jason Ware, chief investment officer at Albion Financial Group, said: "Portfolio managers [are] looking for other opportunities outside of owning AI."

This suggests a broadening of market participation, with investors rotating into sectors and companies that may be undervalued relative to mega-cap tech stocks.

Can the Rally Continue?

Historically, a strong first half often leads to further gains in the second half, but much depends on macroeconomic conditions and corporate earnings. The key question is whether small caps can sustain their momentum amid potential economic headwinds.