The small-cap Russell 2000 index (RUT) has become the first major U.S. index to enter a bear market, defined as a decline of 20% or more from recent highs.
Leading small-cap stocks include restaurant chain Brinker International (EAT), grocery store chain Sprouts Farmers Market (SFM), and quantum-computing firm IonQ (IONQ). Smaller companies have been selling off in recent weeks as uncertainty around trade tariffs and the potential for a U.S. recession grew more pronounced.
News of U.S. President Donald Trump’s aggressive new tariffs has sent stock markets around the world plunging and has pushed the Russell 2000 Index down more than 5% on April 3, bringing its losses from its November 25 record close to 21% and placing it officially in a bear market.
Weakening Economy
Analysts say that small-cap stocks are especially vulnerable to a slowdown in the U.S. economy and that their profits can be expected to deteriorate in coming months. The current plunge is a sharp reversal from last November when small-cap stock prices surged immediately after Trump’s re-election. Small-caps were believed to be beneficiaries of lower tax rates and de-regulation. But that hasn’t materialized.
The Russell 2000 flirted with a bear market in early March amid a monthlong market selloff spurred by uncertainty surrounding Trump’s tariffs plans. But the index recovered somewhat in recent weeks and never officially fell 20% from its recent high until April 3.
Is the iShares Russell 2000 ETF a Buy?
The iShares Russell 2000 exchange-traded fund (IWM), which tracks the leading small-cap stock index, has a consensus Moderate Buy rating among 1,943 Wall Street analysts. That rating is based on 1,310 Buy, 585 Hold, and 48 Sell recommendations issued in the past three months. The average IWM price target of $276.73 implies 44.88% upside from current levels.
