Shares of industrial and transportation companies rallied as traders chased gains in some of the sector to finish the first half of the year.

The SPDR Industrial Select Sector exchange-traded fund, which tracks the industrials group of the S&P 500, is up 9% for the year to date, one of the biggest gains of any sector excluding the technology group.

Analysts at brokerage Goldman Sachs Group forecast outperformance for the Russell 2000 index of small caps, which, like the industrial sector, is considered a cyclical area of the market, and one that will be fraught with risk, in addition to opportunity, in the coming 12 months.

"The small cap index is highly sensitive to GDP growth, which the Fed aims to dampen in order to restrain inflation," said the Goldman analysts, in a note to clients, adding that returns on the Russell 2000 in the coming year should substantially surpass those on the S&P 500. "But the Russell 2000 will lag in response to unexpected hot inflation that leads to higher rates, or recession risks. In addition, small caps typically lag during the late stage of the economic cycle."


Write to Rob Curran at rob.curran@dowjones.com

(END) Dow Jones Newswires

06-30-23 1804ET