Why did the Russell 2000 index perform well in 2024?

The performance of the Russell 2000 index, which comprises small-cap stocks, is often influenced by investor sentiment regarding growth potential relative to larger firms. When investors shift their focus to smaller companies, it typically signals a belief in better growth opportunities, which can be driven by various factors such as strong economic growth, innovative product offerings from smaller firms, or the prospect of higher returns compared to established large-cap companies.

In the context of 2024, if the Russell 2000 index performed well, it suggests that investors were optimistic about the growth trajectories of smaller companies. This optimism can be triggered by factors such as increased consumer spending, favorable government policies for small businesses, or advancements in technology that smaller firms can leverage to compete effectively. This shift in focus toward smaller companies can lead to increased investment in that segment, propelling the index upward as market sentiment aligns with the belief in their growth potential.

The other options do not align with this explanation. For instance, large tech companies often dominate investor attention during strong market cycles, while a recession would generally lead to a retreat from equities, particularly smaller and more volatile stocks. High inflation rates could also stifle growth prospects for smaller firms, making them less attractive to investors seeking stability. Therefore, the preference