U.S. small-cap companies have had a strong year, but lingering market concerns such as a potential rate hike this month could spur risk-off sentiment in the weeks ahead, according to BTIG. August will only be the sixth time in the history of iShares Russell 2000 ETF (IWM) where it was up at least 4% during the month and hit an all-time high, but closes the month up less than 1%, making it “an ominous small-cap signal,” BTIG said. Previous five such occurrences happened in July 2000, Sept 2008, June 2015, June 2018 and Nov. 2021, all saw four-month declines averaging 13.57%, according to BTIG. “We continue to see a negative environment for risk heading into the fall, and small-caps are no exception,” the financial services firm noted, adding that 10-year yields are at new cycle highs above 4.75%. IWM YTD mountain ishares The firm also highlighted that the odds for a rate hike in September were back up to 65%, near the highest levels of the year. In addition, September is usually the worst-performing month of the year for small-caps, declining an average 1.51% over the last 25 years, BTIG added. “As the calendar turns into September, many issues for markets remain, and thus we continue to take a cautious view on risk,” BTIG said.
