A major benchmark for U.S. stocks — the Russell 2000 index — turned negative for the year on Monday, an indicator of broader weakness occurring in the economy that's being masked by a few large cap tech equities.
Lending is also often more difficult for small cap companies versus larger cap names, which are can negotiate lower lending rates.
The Russell 2000 has higher sector weight in financials, which makes it more leveraged toward interest rate conditions, said Bespoke Investment Group co-founder Paul Hickey.
"So if you put all those factors together, I wouldn't say that the Russell 2000 is a canary in the coal mine.
The strategist believes that easing pressure on interest rates should result help the small cap index bounce back from its oversold period.
Persons:
Russell, —, Jeff Corey, Corey, Paul Hickey, it's, Hickey
Organizations:
New York Stock Exchange, Nasdaq, Claro Advisors, Investment Group
Locations:
New York City, U.S, financials