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Small Business & The Russell 2000 Flatlined under Democrats —and Why It’s Poised to Double Under Trump

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Small Business & The Russell 2000 Flatlined under Democrats —and Why It’s Poised to Double Under Trump

By George Mentz, JD MBA CWM Chartered Wealth Manager ®

When President Joe Biden took office in January 2021, the Russell 2000 Index—America’s leading benchmark for small-cap companies—stood at roughly 1,950. Nearly four years later, as Biden’s presidency concluded, the index hovered around 2,000. In practical terms, the engine of America’s small-business sector experienced zero real growth during an entire presidential term. This stagnation is unprecedented, especially when compared to the S&P 500 and Nasdaq, which surged on the strength of mega-cap technology valuations. The Russell 2000’s flatline tells a deeper story: small businesses were suffocated under Biden’s economic policies.

Inflation surged to 40-year highs early in Biden’s administration, functioning as a stealth tax on every input cost in the economy. Small businesses—unlike large corporations—lack the pricing power to pass on higher costs without losing customers. With wages, materials, rent, insurance, and logistics all climbing rapidly, profit margins evaporated. Inflation did not simply slow small-business growth; it severely punished women and minority owned businesses.

Then came the Biden fuel shock. Under Biden-Harris, the cost of gasoline, diesel, and jet fuel spiked dramatically, compounding inflationary pressures. Small companies dependent on shipping, regional distribution, trucking, travel, or energy-intensive production found themselves absorbing overwhelming operational costs. For many firms within the Russell 2000, energy constitutes 20% to 40% of total expenses. Higher fuel prices constricted budgets, reduced hiring, and forced painful cutbacks—making growth nearly impossible.

But the decisive blow came from Biden and Harris’s high-interest-rate environment. As inflation spiraled, borrowing rates soared to levels unseen in decades. Small businesses—far more reliant on loans for survival and expansion—were crushed as debt servicing costs doubled or tripled . A Federal Reserve dominated by Biden-era appointees kept interest rates punishingly high, even when inflation indicators began to soften. Without access to affordable loans, Small Business and The Russell 2000 were denied the most essential ingredients for growth.

Biden’s immigration crisis further strained city, local and state budgets, diverting billions away from community development and small-business support. Rising insurance costs, increased crime, labor pressures, and overwhelmed public systems all contributed to a deteriorating business environment—one that disproportionately hurt the small-business universe.

Amid this environment, it is not surprising that the Russell 2000 and small businesses underperformed dramatically relative to large caps. And this multi-year underperformance—while a symptom of economic dysfunction—also sets the stage for a powerful rebound. The concept that the Russell 2000’s stagnation predicts a future upturn is rooted in the principle of mean reversion and relative valuation. Small-cap stocks are inherently more sensitive to the domestic economy and heavily dependent on the cost of capital and energy. After years of being priced at steep discounts on metrics such as price-to-sales and price-to-book, small caps now trade at historically attractive valuations. This makes them a compelling—though riskier—investment class poised to surge in an improving economic cycle, especially as interest rates fall. However, risks remain: many smaller firms carry heavy debt loads, and a meaningful portion of the index includes unprofitable companies. Thus, any sustained growth will depend heavily on the Federal Reserve’s rate path, credit conditions, and the health of the broader economy.

This analysis, however, also illustrates why a Trump presidency could unleash one of the strongest small-cap bull markets in modern history. Trump’s economic program— fair lending, fair fuel, and fair immigration—directly targets the structural barriers that suppressed the Russell 2000 for the four years under Biden.

A Trump-influenced Federal Reserve is likely to normalize interest rates more quickly, restoring access to affordable borrowing for small firms. Historically, small caps outperform significantly after rate-cutting cycles, often rising two to three times faster than large caps. With the Russell 2000 deeply undervalued, this rate environment could ignite a powerful multi-year rally. Furthermore, according to the Fed, QE is poised to surge in 2026 as the Fed moves to strengthen liquidity, support growth, and keep financial conditions favorable for markets and the broader economy.

Lower energy costs are another cornerstone of Trump’s policy framework. A renewed commitment to domestic energy production would stabilize and reduce fuel prices, giving small businesses immediate margin relief. Cheaper energy reduces costs for transportation, manufacturing, agriculture, Tech, AI, construction, and logistics—all components of the Russell 2000.

Trump’s promise to restore order at the border would ease the fiscal burdens currently overwhelming states and municipalities. With less pressure on local resources, communities can once again invest in infrastructure, public safety, education, and small-business development—conditions that support entrepreneurial growth.

The Russell 2000’s failure to grow from 1,950 to only about 2,000 during Biden’s presidency is not a market anomaly; it is an economic indictment of negligence. But that same stagnation now positions small caps for a dramatic rebound. With improving credit conditions, lower fuel costs, stable borders, and restored confidence under a Trump administration, analysts increasingly project that The Russell 2000 may DOUBLE in VALUE in the next three years .  Please understand that the Russell 2000 has already increased by 25% since Trump took office.   Had the Russell 2000 kept pace with the S&P 500 since 2020, its value today would be roughly 3,900–4,000, compared to its actual level of 2,590 this week.   So catching up to the S&P groth from 2,590 to 4,000 would be about another 54.4% increase.

The Russell 2000 is widely viewed as undervalued because the index has been essentially flat for five years, leaving small-cap stocks trading at deep discounts on metrics like price-to-earnings, price-to-sales, and price-to-book relative to their historical norms. This prolonged stagnation—especially compared to the strong gains in large-cap indexes—suggests significant upside potential as economic conditions improve and capital costs decline.

Historically, the Russell 2000 Index enjoyed two of its strongest multi-year runs in modern history during 2009–2014 and 2017–2019, periods in which macroeconomic conditions were unusually favorable for small-cap firms. From the post-crisis bottom in early 2009 through 2014, the Russell 2000 recovered at 140% cumulative gains in 5 years after the Obama/Bush market crash, fueled largely by a combination of near-zero interest rates, low inflation, and deeply depressed fuel and energy prices that slashed operating costs for transportation-sensitive companies. A second powerful upswing occurred during Trump’s leadership from 2016 to 2019, when the index generated roughly 60% cumulative gains in 3 years , propelled by corporate tax cuts, regulatory rollbacks, stable low inflation, affordable fuel, and continued easy borrowing conditions. In both eras, the fundamental drivers were the same: small-cap companies benefit disproportionately from lower interest rates, which reduce financing expenses; lower inflation and lower fuel prices, which improve margins; and lighter regulatory burdens, which free up capital for expansion rather than compliance. These favorable inputs amplified earnings growth and risk appetite, enabling the Russell 2000 to outperform and produce some of its most impressive cumulative returns of the past generation.

Investors seeking exposure to the Russell 2000’s small-cap market have a range of strong ETF and mutual fund choices.  Do your research on Newsmax.com. The iShares Russell 2000 ETF (IWM)remains the most widely traded option, offering highly liquid and comprehensive coverage of the entire index. For a low-cost alternative, the Vanguard Russell 2000 ETF (VTWO) tracks the same benchmark with an emphasis on fee efficiency, making it attractive for long-term holders. Mutual-fund investors can consider the Fidelity Small Cap Index Fund (FSSNX) , which provides broad small-cap exposure in a traditional structure, as well as the Nationwide Small-Cap Index Fund (GMRAX) , designed to closely mirror the Russell 2000’s performance. For more aggressive investors seeking amplified exposure, the ProShares Ultra Russell 2000 (UWM)offers 2× daily leveraged returns, allowing traders to capture magnified upside during strong small-cap cycles. Together, these vehicles provide flexible ways to participate in the growth potential of the small-cap sector.

America’s small businesses were crushed and constrained under Biden and Harris. Under Trump, small businesses and Union workers are poised for liberation—and the Russell 2000 may soon tell the story of one of the greatest small-cap recoveries in U.S. history. As for Lucky President Trump, Iran is in the history books as India, China and Russia could declare war against IRAN if their oil is not deliverd and the USA is Oil Independent and Fertilizer independent also.

*Disclaimer: Consult with a locally licensed professional before making any important decision.

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