Core Viewpoint - The Federal Reserve has lowered the benchmark interest rate by 25 basis points to a range of 4% to 4.25%, with expectations for two more cuts by the end of 2025, which has positively impacted small-cap stocks like the Russell 2000 [1][4]. Group 1: Market Performance - The Russell 2000 index, which tracks 2,000 smaller companies, has seen a significant increase of 10% since the end of July, outperforming the S&P 500 during the same period [4]. - Following the Fed's rate cut announcement, the Russell 2000 rose over 2% and approached its all-time closing high of 2,442.74, indicating a potential recovery for small-cap stocks [4]. - Analysts predict that the Russell 2000 could rise as much as 20% in the next 12 months, compared to an 11% increase expected for the S&P 500 [7]. Group 2: Economic Factors - The reduction in interest rates is particularly beneficial for small-cap companies, many of which are highly leveraged and rely on variable financing, thus reducing their interest expenses [5][7]. - Despite the positive outlook, small-cap firms face risks such as lower margins, higher debt loads, and sensitivity to tariffs, which could impact their performance [5]. Group 3: Market Sentiment - Major financial institutions like Bank of America and UBS foresee a rebound in the Russell 2000, while Goldman Sachs warns of limited potential for small-caps to consistently outperform [5]. - The S&P 500 has been performing well, setting five records in a month, with some analysts predicting it could reach 7,000 by year-end, highlighting a broader market optimism [3].