1. Small-cap stocks dropped nearly 15% since December 2024, signaling a market correction. 2. S&P 500 performs slightly better, down around 2% in the same period. 3. Higher interest rates from inflationary policies could affect smaller companies significantly. 4. The S&P 500 trades at a much higher earnings multiple than the Russell 2000. 5. Investors consider depressed valuations of small-caps for potential buying opportunities.
While S&P 500 stocks are currently outperforming small-caps, policy-driven potential inflation could lead to volatility. Historical precedents show that rising interest rates often impact large-cap stocks, but not always immediately.
The interplay between small-cap performance and larger indices could expose structural weaknesses in the market, affecting investor sentiment across the S&P 500.
Market reactions to potential policy changes and earnings reports could influence S&P 500 in the immediate future. However, long-term effects depend on broader economic stability.