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Small-cap stocks, represented by the Russell 2000 ($IWM), have been underperforming large-cap stocks, such as the S&P 500 ($SPY) and the Nasdaq Composite ($QQQ), with the underperformance extending to the lowest levels since 2001 and at least 2000. The Russell 2000 has experienced a decline for the 3rd consecutive session, reducing its gains. This underperformance has been attributed to small caps being more at risk from higher interest rates, impacting company profits. The Micro-Cap ETF ($IWC) is now down 12.4% year-to-date, while the S&P 100 ($OEF) and Nasdaq 100 ($QQQ) are up over 20% year-to-date. Despite the underperformance, there are still success stories in the small-cap market, although the divergence between small caps and large caps has been described as 'ugly.'
