Small-cap news: Russell in bear market, downgrades, shifting sentiment

Futures on the small-cap Russell 2000 are down nearly 4% today, April 7. Last week, the index officially entered a bear market as it is now down 25% versus its high from November. This week, investors are bracing for more news on U.S. tariffs.

Following U.S. President Donald Trump’s announcement of “reciprocal” tariffs on all imports, the Russell 2000 dropped to enter bear market territory. On Thursday, April 3, the index tumbled 6.6% during a broad market selloff, extending the decline versus its 52-week high to 21.8%. Note that a drop of 10% from a yearly peak is considered a correction, while a decline of 20% or more qualifies as a bear market.

The selloff continued into Friday, with the Russell 2000 falling another 4.4% to close at 1,827 points. Since peaking on November 25, it has lost over 25% and year to date is down 18%.

By comparison, the S&P 500 is off 14% since the start of the year.

The market action points to a full one-eighty in sentiment toward small-cap stocks. Just last year, investors believed smaller firms would benefit from Trump’s election — his promises of tax cuts and deregulation were expected to spur economic growth amid lower interest rates.

But those hopes have faded, as Freedom Broker wrote in a strategy note dated April 1. The new administration’s rhetoric on trade and fiscal policy, coupled with rising inflation risks and downgraded economic expectations for the first quarter, has heightened uncertainty and volatility. This has handicapped small caps.

Freedom Broker has lowered its 2025 target level for the S&P SmallCap 600 from 1,780 points to 1,400 points and revised its outlook from “neutral-positive” to “neutral.”

On Tuesday, April 1, Canada’s MDA Space announced it would acquire Israeli satellite communications systems manufacturer SatixFy. That same day, SatixFy shares surged 64% on the New York Stock Exchange to close at $1.97 apiece.

Even last week’s broad market drop, the biggest in five years, did not significantly weigh on SatixFy — it gained 55% for the week.

The selloff has continued today, with Russell 2000 futures falling 4%.

Investors may soon get more clarity on the U.S. tariff strategy. Over the weekend, Trump told reporters he had spoken with leaders from Europe and Asia about trade, according to Reuters. Treasury Secretary Scott Bessent said over 50 countries had initiated talks with the U.S. since the tariff announcement last Wednesday.

Today, investors await the release of U.S. consumer credit data for February — an important indicator of consumer confidence.

Tomorrow, April 8, sees NFIB small business optimism, an index reflecting how small business owners view the economy, hiring, and capital spending.