Russell 2000 sets eighth record high in 2026. How long will the rally go?

The Russell 2000, which tracks smid-cap stocks, hit another record high on Thursday, January 22, for the eighth time since the start of 2026. It also outperformed the U.S. broad-market benchmark, the S&P 500, for the 14th consecutive session. That marks the Russell 2000’s longest winning streak versus large caps since May 1996, the Wall Street Journal notes. This is just the beginning, according to investment bank BTIG.

The Russell 2000 rose 0.76% on Thursday to close at 2,718.77 points, setting another all-time high, its eighth record close of 2026, according to Bloomberg.

By comparison, the S&P 500 gained 0.55% on the day. As a result, the Russell 2000 outperformed the broader index for the 14th session in a row. It is the index’s longest such stretch since May 1996.

Small-cap stocks tend to outperform when investors are optimistic about overall economic growth, the Journal noted.

During periods of uncertainty, Bloomberg points out, investors have gravitated toward mega-cap tech stocks with more stable returns. But easing monetary policy by the Fed, which cut rates three times in 2025, combined with growing concerns about the sustainability of AI-driven investments, is prompting asset managers to diversify portfolios, Bloomberg reported.

Markets are not fully pricing in the likely strength of the U.S. economy next year, and small-cap stocks typically outperform during cyclical rallies, Goldman Sachs analyst Matthew Kaplan wrote in a note cited by Bloomberg. Goldman expects U.S. economic growth to exceed forecasts, inflation to come in below expectations, and the Fed to continue cutting rates.

At the same time, Markets Live macro strategist Tatiana Darie said small-cap outperformance will depend on earnings delivery. Earnings per share for companies in the S&P SmallCap 600 is projected to rise 15.4% in 2026, versus 14.8% for S&P 500 constituents, according to FactSet data cited by Barron's.

“While there will be pullbacks, we want to stick on the side of this new trend which is still in its early days, in our view,” Jonathan Krinsky, BTIG’s chief market technician, told Bloomberg.