Payne's Perspective: October 12, 2020: The Beat Will Go On
It was a spectacular week for the stock market as several trading and investing narratives emerged. Once again, the Russell 2000 was the biggest winner and had more than doubled the percentage gains of other large and broad market indices in October.
The Russell 2000
During the week, the Russell 2000 broke a key resistance point, which means barring major exogenous news that slams the entire market, and it should be on its way to return to the highs of the year.
The composition of any index is critical to performance, and it’s one of the reasons why I am so critical of the Dow Jones Industrial Average (but more on that later). The Russell 2000 index was created by the Frank Russell Corp in 1984, and it’s known for its wild swings that see double digital annual returns.
In fact, since 1995, the index has only seen single-digit moves eight times.
Still, the Russell 2000 has always been treated as an also-ran and overlooked by the financial media. I think the index is too broad, but it incubated some real investing gems – and it currently has a roster of super-hot stocks.
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