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Skip NavigationMarketsBusinessInvestingTechPolitics & PolicyVideoWatchlistInvesting ClubPROLivestreamMenuLarge-cap stocks have been holding up OK despite the volatility brought on by higher Treasury yields. The same can’t be said about small caps. The Russell 2000 is down more than 5% over the past month, as 10- and 30-year Treasury yields soar to levels not seen since the early 2000s. Compare the Russell’s performance to the Nasdaq-100 , and the picture is even grimmer. The small-cap index is down about 16% relative to the tech-heavy benchmark, according to BTIG’s Jonathan Krinsky. Krinsky said this puts the ratio’s relative strength index at 12.77, marking just the fourth time since 1985 it has fallen below 14. The other three instances took place in July 2007, August 2011 and March 2020. While it’s a small sample size, a buying opportunity may yet emerge. .RUT .NDX 3M mountain Russell 2000 vs NDX in past 3 months “What’s notable is that the 2011 and 2020 period came after the broad market (SPX) had already experienced extreme stress, while 2007 occurred with SPX near the highs, like it is now,” he wrote. “As far as the absolute ratio of [Russell 2000 to Nasdaq-100], a 13-RSI does bring out our contrarian senses. It’s worth nothing, however, that in 2007 and 2011 the ratio kept moving lower over the next 10 and 30 days. Oversold does not mean over,” said Krinsky. Small-cap stocks are particularly sensitive to higher rates because smaller companies have fewer financial resources and rely on borrowing to grow and maintain their businesses. If rates push higher, it’s more expensive to take out a loan and refinance old debt. In a search for safety, investors have turned to technology and artificial intelligence-linked stocks amid the Treasury yield spike. The Nasdaq-100 is up more than 5% over the past month. That said, Krinsky also said yields are showing signs of exhaustion. If they make a meaningful move lower, it could give the Russell 2000 a much-needed boost. For its part, Barclays highlighted several small-cap stocks that could outperform in the event of a bounceback for the group. Among them are Ultra Clean Holdings , Penguin Solutions and PTC Therapeutics .Read More