Small-cap value companies are the most attractive in the market right now, according to Josh Brown, CEO of Ritholtz Wealth Management. “I think the next leg of the rally didn’t wait for this pivot. I think it front-ran it,” Brown told CNBC’s “Halftime Report” on Thursday, pointing to the iShares Russell 2000 Value ETF (IWN) as his favorite bet for the year-end rally. “This is the place to be.” Small caps have lagged this year. The Russell 2000 itself is up 13% year to date, and the IWN has climbed 11% during that time. The S & P 500, meanwhile, is up nearly 23% in 2023. That said, the smaller names have gotten a boost recently. These companies are often more affected by economic changes, including recessions. The IWN has popped 11.4% this month and more than 14% this quarter. The Russell 2000 has gained 10.8% in December, while the S & P SmallCap 600 index is up 11.4% this month. Both the Russell and S & P small-cap indexes substantially outperformed the broader market on Thursday, soaring more than 2%. IWN mountain 2023-11-30 IWN in past month The recent gains on the IWN are “ridiculous until you realize how much catch-up it has to play just to get anywhere close to what large-cap S & P 500 names did,” Brown said. By comparison, the S & P 500 has advanced 23.2% this year, while the Russell has added 13.7%. Looking at the stocks reaching their 52-week highs on Thursday, which include Blackstone , Lennar , PulteGroup , JPMorgan and Chipotle Mexican Grill , Brown pointed out that most are not large-cap tech names. “None of those companies do AI. …That’s the message,” Brown said. “The catch-up trade is working. I think it’s got room to continue to work.” Tech-related names Apple and Intel did reach a fresh 52-week high on Thursday. Wall Street is coming off a broad rally after the Federal Reserve indicated it could cut interest rates three times in 2024. The Dow Jones Industrial Average hit a record, while Treasury yields fell to their lowest levels in months.
