Persistent high interest rates due to stubborn inflation are negatively affecting small-cap companies, as they increase borrowing costs that these firms struggle to maintain. Despite 2023’s optimism for all equities, small-caps are suffering, as signaled by the Russell 2000 entering negative territory. Unless macroeconomic conditions improve, most notably lower interest rates, the situation is unlikely to change.
Small-Cap Bears Thrive as Russell 2000 Enters Negative Territory
Persistent high interest rates due to stubborn inflation are negatively affecting small-cap companies, as they increase borrowing costs that these firms struggle to maintain. Despite 2023’s optimism for all equities, small-caps are suffering, as signaled by the Russell 2000 entering negative territory. Unless macroeconomic conditions improve, most notably lower interest rates, the situation is unlikely to change.