As the economy rebounds from the Covid-19 pandemic, small-capitalization stocks and related exchange traded funds are not recovering as quickly in the face of ongoing financial concerns, supply chain hurdles, and hiring problems.

Year-to-date, the iShares Core S&P Small-Cap ETF (IJR) fell 7.3%, Schwab U.S. Small-Cap (NYSEArca: SCHA) dropped 9.5%, iShares Russell 2000 ETF (IWM) fell 10.3%, SPDR Portfolio S&P 600 Small Cap ETF (NYSEArca: SPSM) was 7.3% lower, and Vanguard S&P Small-Cap 600 ETF (NYSEArca: VIOO) was down 7.4%.

While some small businesses have seen revenues rebound along with the expanding economy, the recovery has been uneven across the segment, with smaller firms and those owned by racial minorities seeing poorer results, Reuters reports.

“Many small businesses have not recovered to pre-pandemic levels, with the effects of the pandemic hitting disproportionately hard among firms in the leisure and hospitality sector, smaller firms, and firms owned by people of color,” Federal Reserve researchers said in a statement.

According to the latest Fed survey, which was conducted between September and November of 2021, about 63% of firms continued to revenues below pre-pandemic levels, and 43% of businesses had lower employment levels due to ongoing pandemic-related concerns.

According to the Fed, businesses continued to fall short of finding adequate workers and were still facing supply-chain issues, with 60% of firms highlighting hiring issues and 60% underscoring supply-chain problems as a top operational challenge over the past year.

The report revealed that many small businesses remain in tough financial waters due to the pandemic and its lingering effects. According to the report, over half, or 59%, of firms surveyed indicated they were in “fair” or “poor” financial condition, compared to 57% a year earlier.

Additionally, the outcomes varied by race, with some 55% of white-owned businesses stating that their financial condition was “fair” or “poor.” On the other hand, that figure rose to 81% among Asian-owned businesses, 76% for Black-owned firms, and 74% for Hispanic-owned businesses, similar to the previous year.

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