The Russell 2000, a small-cap equity gauge composed of the 2,000 smallest companies by market capitalization, has been outperforming the larger S&P 500 index this month. So far in December, the Russell 2000 has risen by 7.7%, surpassing the S&P 500's gain of 3.1%.

This marks the best month for the Russell 2000 in comparison to the S&P 500 since January 2021 when the small-cap index rose by 5% while the large-cap gauge fell by 1.1%. According to data from Dow Jones Market Data, the last time the Russell 2000 showed such strong performance against the S&P 500 was earlier this year.

On Wednesday, the Russell 2000 saw a substantial increase of 66.24 points, or 3.5%, reaching a closing level of 1,947.51. This represents its highest level since August 7 and coincided with a rally in the markets after the Federal Reserve announced no change to its key policy rate range of 5.25% to 5.5%. However, they did signal a potential pivot to rate cuts in 2024.

It is worth noting that this recent outperformance by small-cap stocks is a reversal of the trend seen throughout the year. The Russell 2000 has lagged behind its large-cap counterparts, posting only a 10.6% increase year-to-date compared to the S&P 500's gain of 22.6%, and a significant 40.8% gain for the technology-heavy Nasdaq Composite.

The Dow Jones Industrial Average also reached a record high on Wednesday, climbing by 1.4% and surpassing 37,000 points for the first time. The S&P 500 and Nasdaq Composite experienced similar gains of nearly 1.4%.

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