Wall St Week Ahead-Small caps lose Trump bump as rising rates sap strength
Trump presidency, one corner of the U.S. stock market expected to benefit from the Republican's policies has been stumbling.
Shares of smaller U.S. companies have been under pressure, with the small-cap Russell 2000 last week marking a 10% correction from its November highs. The S&P 500, the benchmark for large-cap companies, declined less than 3% in that time.
Trump, who will be inaugurated for his second term on Monday, is expected to back an agenda promoting domestic economic growth, increasing the appeal of small-cap stocks.
But the group encountered a severe headwind in recent weeks: the prospect of higher interest rates than previously expected, which stand to raise borrowing costs that hit smaller companies particularly hard.
«With more pro-growth policies, small caps tend to do better in theory when the economy is stronger,» said Keith Lerner, co-chief investment officer at Truist Advisory Services.
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