Persistent Capital Outflow from Small-Mid Cap ETFs
The US Federal Reserve's delay in interest rate cuts and inflation concerns are leading to a rapid outflow of capital from small-mid cap based ETFs. Notably, the iShares Russell 2000 ETF has seen an outflow of over $4 billion in the past month, equivalent to about 6% of its assets under management. Additionally, as the Russell 2000 index has dropped nearly 10%, the iShares Russell 2000 ETF's returns have also decreased by over 9%.
The protectionist policies of the Trump administration are exacerbating these outflows, and the delayed interest rate cuts are cited as significant reasons behind this trend. This is having a very negative impact on small-mid cap companies, with investors increasingly shifting their focus towards large-cap stocks. As enthusiasm for large-cap investments continues, there is an accelerating net outflow from small and mid-cap related stocks.
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