Small-cap stocks lag as rising interest rates hit Russell 2000 performance in September.

Small-cap stocks, represented by the Russell 2000 index, have fallen behind larger indexes like the S&P 500 and Nasdaq-100 in September due to rising interest rates and falling bond prices. The Russell 2000's year-to-date gain dropped from 20% to 14%, while the S&P 500 and Nasdaq-100 maintained stronger returns. This underperformance is linked to a high correlation between small caps and long-term Treasury yields, which have been rising amid the Federal Reserve's hawkish stance. Options trading data shows increased bearish bets on small caps, suggesting continued caution if rates keep climbing, though some small caps still show solid fundamentals and earnings prospects.

Small-cap stocks tracked by the iShares Russell 2000 ETF (IWM) show a slight decline of 0.12% on Pluang, priced at USD 281.64 as of Sep 25, 2026 01:43 WIB. Meanwhile, the iShares 20 Plus Year Treasury Bond ETF (TLT) is down 0.96% at USD 79.69, reflecting ongoing pressure in long-term bonds that impacts small caps.