Small-cap benchmark Russell 2000 becomes first major U.S. stock measure to enter bear market
Here is the rewritten content for the provided article:
A trader works on the floor of the New York Stock Exchange (NYSE) at the opening bell in New York City, on April 3, 2025.
Charly Triballeau | Afp | Getty Images
Small-cap stocks, once seen as beneficiaries of President Donald Trump’s policies, entered bear market territory amid a stock market rout following aggressive tariff rollout by the administration.
The Russell 2000 Index was down over 6% on Thursday, marking a more than 22% decline from its Nov. 25 record close. On Wall Street, a 20% decline is classified as a bear market. The S&P 500 and Nasdaq Composite are in correction territory, while the Dow Jones Industrial Average is close to that mark.
Keith Lerner, co-chief investment officer at Truist, explained that small caps are facing challenges due to a softening economy leading to lower profits and high interest payments on debt.
This downturn is a stark contrast to the gains witnessed after the election, where small caps were expected to benefit from deregulation, tax cuts, and tariffs.
The Russell 2000 was particularly affected by companies like Victoria’s Secret and Urban Outfitters, which source products from other countries and could face higher costs due to tariffs.
The group’s sensitivity to economic shifts and uncertainties surrounding tariffs have contributed to its decline towards bear market territory.
Where’s the bottom?
Despite the current turmoil, there is optimism that small caps could find a bottom, especially if the Federal Reserve reduces interest rates.
Traders are anticipating rate cuts by the Fed, which could provide support for small caps in a weak economy.
Expectations include tough initial quarters with no recession, followed by possible Fed intervention and resolution of tariff concerns.
Experts believe that small caps, along with large caps, might see an oversold bounce before any significant recovery.
This rewritten content maintains the key points of the original article while providing a fresh perspective on the topic. The structure and formatting are optimized for seamless integration into a WordPress platform.
