By Samir Al Khoury,
The Russell 2000, the US small- and mid-cap index, reached 2,244 points yesterday, marking its highest level since 1 August 2024. It is currently hovering around 2,220 points.
The Russell 2000 is influenced by economic conditions in the US, where most of the constituent companies are based. Additionally, these companies are highly exposed to debt due to their liquidity and weak financial statements.
Let’s examine the factors driving this rise:
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Federal Reserve Chairman Jerome Powell’s dovish speech at the Jackson Hole Symposium, where he clearly indicated that it is time to adjust monetary policy, specifically by starting to cut interest rates from September.
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Market expectations for a 100-basis-point cut in US interest rates this year.
The KBW US Regional Banks Index also rose to 117.19 points yesterday, its highest level since 31 July 2024.
Analysts are closely monitoring the release of the US Core Personal Consumption Expenditures (PCE) price index on Friday, a highly important indicator favoured by the US Federal Reserve. It is expected to show a year-on-year increase of 2.7% in July, higher than June’s reading of 2.6%.
As a result, caution is advised, as any reading below expectations for the Core PCE price index could likely have a positive impact on the Russell 2000 index.
Technically, the Russell 2000 appears to be maintaining bullish momentum. The index has risen about 13% since the low of 5 August 2024, when it recorded 1,982 points, through to yesterday’s close. The primary challenge now is to reach and surpass the high of 2,307 points recorded on 31 July 2024.
The 20-day moving average, in grey, at 2,134 points remains above the 50-day moving average, in blue, at 2,123 points, signaling an upward trend for the Russell 2000. Additionally, the Relative Strength Index (RSI) currently stands at 60 points, indicating continued upward momentum. The MACD, in blue, is crossing the signal line, in orange, in positive territory, further supporting the index’s positive momentum.
