There is a big Russell index realignment this month that is expected to boost many of our fast-growing stocks that will be added to the Russell 1,000 and 2,000 indices. The Russell 2000 is closely watched because its focus on smaller companies makes it a useful gauge of the U.S. economy. Smaller stocks that get elevated into the Russell 2000 index can soar.
The actual Russell reconstitution occurs on Monday, June 29, but Russell has been and will continue to announce its preliminary lists of stocks that it plans to add to its respective indices every Friday in June. In other words, many small-to-mid capitalization stocks will benefit from the anticipation of the institutional accumulation that occurs at the end of June when the Russell indices are rebalanced.
Due to this Russell index realignment, June has historically been a strong month for small-to-mid capitalization stocks. In fact, a couple of decades ago, my Breakthrough Stocks, on average, surged by over 6% on the day of the actual index reconstitution.
Even though Russell strives to dilute its impact on stocks by releasing the stocks it tentatively wants to add to its indices in a weekly report for several weeks, during the actual day of the index realignment, June 29, I expect that many of my small-to-mid capitalization stocks will benefit from persistent institutional buying pressure.
Looking forward, I expect that my fundamentally superior stocks will appreciate another 30% to 40% between now and the end of the year, despite the fact that we are already up over 30% year to date thanks to Argan Inc. (AGX), Bloom Energy (BE), Carpenter Technology (CRS), Celestica (CLS), Constellium (CSTM), Kaiser Aluminum (KALU), Micron Technology (MU), Seagate Technology (STX), Sezzle (SEZL), Super Micro Computer (SMCI), TTM Technologies (TTMI) and other powerful stocks.Â
The U.S. is an oasis
In the wake of the military action in Iran, many small-to-mid capitalization stocks are benefiting from a bias to more domestic stocks, since the U.S. has emerged as an economic oasis compared to the rest of the world, which is suffering from a demographic decline and sputtering gross domestic product (GDP) growth.Â
As an example of a demographic decline, it was recently reported that Japan’s population declined by over 3 million people from 126.1 million in 2020 to only 123 million in 2025.
This is the largest Japanese population decline since records started over 105 years ago. As an example of sputtering GDP growth, Statistics Canada reported that its GDP has contracted for two consecutive quarters, so Canada is officially in a recession after the fourth and first quarter GDP declined at a 1% and 0.1% annual pace, respectively. In the meantime, economic growth is booming in the U.S., and the S&P 500’s earnings are now forecasted to rise 21.5% in 2026.
For the U.S., I am anticipating a 5% to 6% annual GDP growth that should arrive no later than the third quarter. As evidence of accelerating GDP growth, the Commerce Department recently announced that durable goods orders surged 7.9% in April, up from a 1.3% increase in March. Economists were expecting a 3.5% annual surge, so the April durable goods report was much stronger than anticipated.
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