Federal Reserve officials cut interest rates by 25 basis points, hinting at two more cuts by year-end. The Russell 2000, a small-cap index, is surging towards a record high after a long drought. Analysts predict a 20% increase in the next 12 months due to rate cuts.

Lower rates benefit small-caps as they reduce interest expenses for leveraged companies. Wall Street sees the Russell 2000 rising 20% in the next year, outperforming the S&P 500. Reduced interest costs aren’t the only economic concern, as tariffs could impact small-cap firms with lower margins and higher debt loads.

Despite potential risks, heavyweights like Bank of America and UBS foresee a Russell 2000 rebound. Goldman Sachs warns of limited scope for small-caps to consistently outperform, suggesting portfolio diversification. The market rally may broaden to include small caps, but caution is advised.

Read more at Yahoo Finance.: Small-Cap Russell 2000 Shakes Off Four-Year Funk on Rate Cut