A small benchmark Russell 2000 becomes the first major US shares to enter the bear market

The reserves of small capitalization, which were once considered the main beneficiaries of President Donald Trump’s policy, entered the bear market after a large -scale route on the stock market, which followed the wide and aggressive tariffs of the administration.

A Index Russell 2000 On Thursday, more than 5%fell, leading to its losses from the record on November 25 to about 21%. On Wall -Restitis, 10% rollback is considered a correction, but a 20% decrease is a bear market. A S&P 500 and Nasdaq Composite Both on the correctional territory and Dow Jones Industrial Medium is just below this sign.

“They get in because the economy softens. It will hurt the profit,” said Keith Lerner, co-chairman of the Truist, CNBC. “On the other hand, they still pay a high level of payment of debt because they have more debt with a floating rate.”

“They shrink on both sides,” he said.

This is a sharp lapel from the profits observed on trading days after the November election, with small caps that are regarded as beneficiary With de -deregulation, reducing tax rates and even tariffs, since the groups are less transnational companies than the big CAP stocks.

Russell 2000 closed this election week with an advance by 8.6%, nearly four percentage points higher than 4.7% of the S&P 500 weekly. Along this, it became one of Trump’s hottest bidding. In fact, Tom Lee is the head of the partner and the head of the research in Fundstrat – stated that small hats can be surpassed More than 100% over the next few years.

But Russell 2000 was tightened below on Thursday in such names Victoria’s Secret and Urban selectionWhat source many products from other countries can see much higher expenses and less profitability from tariffs.

And the group is particularly sensitive to economic shifts, given their small size, which means less financial flexibility as actions with great capitalization. Jpmorgan predicted that if Trump sweep new mutual tariffs stay, the American economy will Probably get into the recession.

Previously, Russell 2000 approached the market territory of the bear in March amid the monthly sale of the market caused by the uncertainty associated with Trump Tariff plans And an increasing concern on the slowdown street.

“Small hats in the first half of the economic recession are usually reduced by 13%, so it is worse than where we were for the average recession,” said Stephen Desanis, a strategist that covers small and mid-capital companies in Jefferies, in an interview with CNBC. “For the medium market, small hats are reduced by 26%, so we approach this number.”

Where’s the bottom?

While small hats are now in the shock, Desanctis suggests that the group may end up finding the bottom, especially if the federal reserve system will again reduce interest rates.

Currently, traders pricing of 58.5% chances of four -quarter interest points by the end of the year, with more than 90% chances for next incision on June Central Bank meeting, CME Fedwatch Tool.

“When the economy becomes weak, do we get support from the Fed? We say so. Usually it’s good for small hats,” said the strategist of our own capital.

The trooper added that the path from here could look like “tough” first two quarters, though no recession, before the Fed, may come to the rescue in the summer. From there, he suggests that some tariff problems that can increase the costs of businesses – can be solved, which makes the market focus on deregulation again.

Lerner, which is underweight, is similarly constructive. He noted that in addition to de -deregulation, more attention to the expansion of taxes and the return of the spirits of animals that lead to a pickup when mergers and acquisitions should enable small caps to do well later a year, or every time investors feel the worst of the economic outlook.

Moreover, because things “do not move in a straight line,” it will not surprise “for small hats, as well as for large hats to see” rescued rebound “soon, said Lerner.

Lerner does not believe that big hats will face a similar fate that is part of the bear market area as small hats. The S&P 500 is still at a considerable distance from the bear market, which is more than 11% discount on February 19.

“When small hats decreased by 20%, it tells you that they were already-honey-market did not start here. It lasted several months,” Co-Cio said. “Accordingly, large hats are also reduced, but they are reduced in half of relatively small hats. Our base case for big hats you can see further, but we do not call for a bear.”