Bloomberg Surveillance · Wednesday, July 1, 2026
Jill Carey Hall of Bank of America explains that small-cap stocks (Russell 2000) are having a strong year after over a decade of underperformance. This is driven by cyclical positives like a manufacturing recovery, higher oil prices, and strong performance in AI infrastructure stocks. Despite the index's rise, Hall believes parts of the index, particularly healthcare, could still play catch-up, and that a shift towards higher-quality stocks is expected in the second half of the year.
“Well, it's been a long time where they've been underperforming, I mean really for over a decade. And you know, right now you have some some cyclical positives because they'd been in an earnings recession, finally started to come out of that, and you've had the manufacturing recovery in the US finally take hold the ism. Manufacturing indicators the single most correlated macro indicator with the Russell two thousand.”
“So even though the index is up so much this year, I think there are parts of the index that could still play catch up. You know, healthcare has been underperforming, but M and A activity, yes, and healthcare and biotech had not looked particularly attractive in our work in small caps, but finally are starting to The rep is there's.”
“So that that kind of three standard deviation event and how much low quality stocks outperformed, I think now kind of paves the way that we could go back to a more normal environment or higher quality stocks work within small caps in the second half.”