Small-cap stocks are positioned for potential further gains after recently achieving highs, according to Steven DeSanctis, an equity strategist at Jefferies, who focuses on small- and mid-cap companies. DeSanctis has raised his year-end 2025 target for the Russell 2000 index to 2,665, suggesting an approximate 8% upside from Thursday’s closing price. If this target is met, it would result in an impressive full-year return of 20.7% for the index.
Thursday marked a significant milestone for the Russell 2000, which registered its first all-time closing high since November 2021. The index also achieved a new all-time intraday high during the trading session. This surge in small-cap stocks occurred just a day after the Federal Reserve announced a quarter percentage point reduction in its key interest rate.
DeSanctis emphasized the importance of aligning with market trends, stating, “We are going with the old adage of ‘Don’t fight the Fed.'” He noted that the market had been anticipating this rate cut, which is already reflected in current pricing. Additionally, DeSanctis expressed increased optimism regarding earnings as the year draws to a close. He forecasts a 5.5% growth rate during this period, surpassing the broader market’s more conservative growth expectation of 3.3%.
To support his positive outlook, DeSanctis highlighted specific small- and mid-cap firms that have demonstrated strong earnings without any downward adjustments to estimates in the past month. Among these are agricultural machinery manufacturer AGCO, with a near 17% increase this year, and Boyd Gaming, which has seen a rise of over 14%.
Despite a slight decline in trading on Friday, the Russell 2000 had touched a fresh all-time high earlier in the session. Year-to-date, the index has gained more than 10% and is up nearly 18% over the past six months, outpacing the S&P 500’s approximate 17% increase.
DeSanctis, who has been analyzing small-cap stocks for nearly 30 years, previously achieved recognition for his expertise, ranking at the top in the small companies category in Institutional Investor for three consecutive years starting in 2010. His insights reflect a strong track record in the sector, underlining the potential for continued growth among small-cap stocks as they navigate favorable economic conditions.
