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Why Small Caps Are Getting Crushed Despite a Strong Economy
Episode 104 of The Macro Memo with Fexingo: The Russell 2000 is down almost 2% over the past five days while the S&P 500 and Dow hover near flat. Lucas and Luna break down why small-cap stocks are underperforming despite a labor market that just added 57,000 jobs and an unemployment rate that dipped to 4.2 percent. They focus on the 10-year Treasury yield climbing to 4.57 percent — a level that historically squeezes smaller companies with floating-rate debt. They also connect this to the labor force participation rate falling to its lowest outside of Covid, which signals that the pool of…
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