Russell 2000 hits record high on Fed cut: does the small-cap rally have more legs?

russell 2000, fed rate cut, nyse, S&P 500 [https://invezz.com/wp-content/uploads/2025/09/20250919_141009_n1Ohy.png] US stocks extended their rally on Friday, with all major indices hitting fresh record highs following the Federal Reserve’s decision to cut interest rates. The small-cap Russell 2000 index joined the broader market in scaling new peaks. The Fed’s quarter-point rate cut on Wednesday, which lowered the federal funds rate to a range of 4% to 4.25%, was met with investor optimism. Markets are now pricing in two additional cuts before the end of the year, creating a supportive backdrop for equities. While the S&P 500 and Nasdaq Composite advanced, it was small caps that captured market attention. The Russell 2000 has gained nearly 9% over the past month, outpacing the S&P 500’s 3.67% climb and the Nasdaq’s 5.9% rise. Since bottoming out on April 8 amid tariff-driven market turmoil, the small-cap index has surged about 40%. CATCH-UP TRADE UNDERWAY Analysts say the recent rally reflects a long-awaited catch-up trade for small caps, which have lagged behind large-cap peers for much of the past decade. “Small caps have underperformed pretty dramatically…