'Ominous' small-cap signal suggests need for caution in weeks ahead: BTIG
While small-cap companies are having a solid year, lingering market concerns such as a potential rate hike stand to fuel risk-off mood.
TL;DR
- Despite a strong year, U.S. small-cap companies may face a risk-off sentiment due to market concerns like a potential rate hike.
- A specific August performance pattern for the iShares Russell 2000 ETF (IWM) has historically preceded four-month declines averaging 13.57%.
- BTIG predicts a negative environment for risk heading into fall, citing high 10-year yields (above 4.75%) and increased odds of a September rate hike (65%).
- September is historically the worst-performing month for small-caps, with an average decline of 1.51% over the last 25 years.
- BTIG maintains a cautious view on risk as the calendar turns to September, with several market issues remaining.