Despite the S&P 500 experiencing its worst year since the 2008 financial crisis in 2022 due to higher rates, it rebounded last year, driven by the artificial intelligence investing trend. However, the Russell 2000-listed companies are far from the Big Tech giants and are unlikely to benefit from the rise in AI in the same way. The Russell 2000's slump could be an indicator of a potential slowdown in growth, with some experts skeptical about the economy's ability to withstand the impact of higher borrowing costs.
Key takeaways:
- The S&P 500 index closed at a new all-time high, while the Russell 2000, which tracks small-cap US stocks, is still in a bear market, trading 22% below its November 2021 peak.
- Higher interest rates have impacted businesses, particularly those in the Russell 2000, as they are borrowing less due to the difficulty of repaying loans at higher rates.
- Blue-chip stocks also felt the impact of higher rates in 2022, but rebounded last year, powered by the artificial intelligence investing craze.
- The Russell 2000's slump could be a sign of slowing economic growth, with some economists warning of a possible severe slump in growth.