Amid the S&P 500's recent decline, investors are focusing on mixed signals regarding tariffs and recession risks. The Russell 2000 index, reflecting smaller companies, has declined over 18% recently, indicating greater vulnerability to economic shifts and potentially signaling a bear market. These smaller firms have tighter profit margins and less flexibility compared to larger corporations. Analysts suggest that the downturn in the Russell 2000 offers clearer insights into recession fears amidst continual uncertainty surrounding trade policies from the administration, highlighting the instability in the market.
The Russell 2000 now appears likely to become the first major index to slip back into a bear market, defined as a drop of 20 percent or more from its recent high.
If you want one clear signal that the market is worried about recession more than anything else, then look at the Russell, said David Kelly, chief market strategist at J.P. Morgan Asset Management.
These companies tend to run thinner profit margins that can be more easily eroded in a downturn, and they have fewer levers to pull than big companies if they do get into trouble.
The Russell 2000 has tumbled more than 18 percent, roughly double the decline of the S&P 500 since it hit a peak last month.
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