Additionally, periods of rising rates also coincide with expanding economies, which often benefit smaller companies. However, the dollar is sagging this year and the Federal Reserve could be forced to hold off on more rate hikes, scenarios that are pressuring small-caps.
The Fed meets this week amid expectations of its second rate hike this year.
“Here is the tight range of the Russell 2000, and it’s about 6 months in the making. It’s only happened one other time in the history of the index … and the last time it was resolved by a huge explosion on the upside,” said Worth in an interview with CNBC.
Data suggest investors remain leery of small-caps. For example, IWM has lost just over $2 billion in assets during the second quarter, a number surpassed by just two other ETFs.
Tom Lydon’s clients own shares of IWM.