The Small Cap Market’s Struggles
The stock market has been a roller coaster ride in recent years, with some stocks soaring and others plummeting. One of the biggest losers in the market has been small-cap stocks, which have been struggling to keep up with their larger counterparts.
Small-cap stocks are defined as those with a market capitalization of less than $2 billion. These stocks are typically more volatile than their larger counterparts, and they tend to be more sensitive to economic cycles. As a result, they can be a great way to make money in a bull market, but they can also be a risky bet in a bear market.
Unfortunately, small-cap stocks have been in a bear market for some time now. The Russell 2000, an index of small-cap stocks, has been in a bear market since late 2018. This has been a major blow to investors who had been hoping to capitalize on the small-cap rally that had been taking place in the years prior.
The Impact of Big Tech
The struggles of small-cap stocks have been compounded by the rise of Big Tech. Companies like Apple, Amazon, and Microsoft have become some of the most valuable companies in the world, and they have been driving the market higher.
These companies have been able to take advantage of their size and scale to dominate their respective industries. They have also been able to use their massive cash reserves to acquire smaller companies and expand their reach. This has made it difficult for smaller companies to compete, and it has put a damper on the small-cap market.
The Decline of Small-Cap IPOs
The struggles of small-cap stocks have been further exacerbated by the decline in small-cap initial public offerings (IPOs). Small-cap IPOs have been declining since 2018, and the trend has only accelerated in recent months.
This is due in part to the fact that many small-cap companies are unable to access the capital they need to grow. This is because venture capital firms and other investors are increasingly focusing their attention on larger companies. As a result, small-cap companies are unable to raise the funds they need to expand and compete.
The Impact on Investors
The struggles of small-cap stocks have had a major impact on investors. Many investors have been forced to abandon their small-cap investments in favor of larger companies. This has resulted in a shift in the market, with large-cap stocks now accounting for a larger portion of the market than ever before.
This shift has been beneficial for some investors, as large-cap stocks have been some of the biggest beneficiaries of the bull market. However, it has been a major blow to those who had been hoping to capitalize on the small-cap rally.
The Future of Small-Cap Stocks
It remains to be seen what the future holds for small-cap stocks. Some analysts believe that the market could be poised for a rebound, as the economy continues to recover from the pandemic. Others, however, are more pessimistic, arguing that the market could remain in a bear market for some time.
Regardless of what happens, it is clear that small-cap stocks have been struggling in recent years. The rise of Big Tech and the decline in small-cap IPOs have made it difficult for these companies to compete. As a result, investors have been forced to look elsewhere for returns. It remains to be seen if small-cap stocks can make a comeback, but for now, it appears that the market is firmly in the grip of Big Tech.