July marked a significant market rotation, with investors flocking to small-cap stocks anticipating that the Federal Reserve's expected interest rate cuts would make borrowing cheaper for smaller companies.
This strategic pivot led theiShares Russell 2000 ETF(NYSE:IWM) to experience its best monthly performance against the Nasdaq 100, represented by theInvesco QQQ Trust(NASDAQ:QQQ), since April 2002.
This month, the Russell 2000 rallied by a robust 9.2%, while the Nasdaq 100 fell by 5%, resulting in a 14% relative outperformance of small caps over tech stocks as of July 30.
Chart: Small Caps Sharply Outperformed Tech In July, Notch Strongest Month Since April 2002
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