A bout of small-cap underperformance in the face of renewed “higher-for-longer” rate expectations sees the benchmark Russell 2000 threaten an important...
A continued bout of small-cap underperformance in the face of renewed “higher-for-longer” interest rate expectations saw the benchmark Russell 2000 stock-market index threaten an important support level on Wednesday.
The 200-day average is a metric often viewed by traders and technical analysts as a signal of a market’s long-term trend. Gains for the large-cap indexes have been driven primarily by the artificial-intelligence spawned rally in megacap tech stocks. Investors looking for the rally to broaden out have been optimistic small-cap stocks, which tend to be more oriented to the economic cycle, would benefit as fears of a recession or so-called hard landing as a result of the Federal Reserve’s aggressive monetary tightening campaign gave way to resilient data.
Underperformance has accelerated, perhaps due in part to the regional banking woes in the spring, which further tightened credit and financial conditions for small businesses and is likely to spawn new regulations for small and midsized banks, the strategist said.
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