U.S. small-cap stocks dropped below their 50-day moving average as rising interest rates and reduced consumer spending pressured the market segment, according to Lance Roberts, Chief Strategist at RIA Advisors.
Technical Support Breakdown
The decline in the S&P 600 index concludes a run of outperformance relative to large-cap equities that began in late 2025. Charting data compiled by BCA Research, Macrobond, and S&P Global shows the S&P 600 breaking below its 50-day moving average trendline after climbing through the first half of 2026.
Analysis on the chart confirms that “small caps have recently weakened and broken down below the 50-day moving average,” leaving the index trading above its longer-term 200-day moving average line.
Reversal of Relative Outperformance
According to Roberts, the technical breakdown marks a reversal in relative momentum for small-cap equities following years of broader market underperformance.
A comparative tracking ratio of the S&P 600 against the S&P 500 — rebased to zero percent on Dec. 31, 2025 —demonstrates that relative outperformance peaked above 10% around July 2026.
Subsequent weakness through September 2026 erased the majority of those relative gains, pulling the ratio back down.
Macroeconomic Headwinds Pressuring Small Caps
Addressing the breakdown on social media platform X, Roberts stated, “Pressure is mounting on U.S. small caps.” Roberts observed that “the S&P 600 has broken below its 50-day moving average, ending a run of outperformance that began in late 2025 after nearly five years of lagging the S&P 500.”
Explaining the fundamental drivers behind the trend, Roberts added that “rising interest rates and a softening consumer aren’t helping” small-cap equities sustain their relative momentum.
How Have Smallcaps Performed in 2026?
At the last check, the State Street SPDR Portfolio S&P 600 Small Cap ETF (NYSE:SPSM), which tracks the S&P 600 Index, was trading 0.54% lower premarket on Thursday. It was up 15.43% over the last year, 13.20% year-to-date, and down 6.25% over the last month. The ETF closed 1.09% lower at $53.70 on Wednesday.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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