HB Wealth says small caps stay resilient in Fed hiking cycle unless 10-year yields spike
IWM•Small-cap resilience and rate sensitivity
- Homrich & Berg analysis flagged small-cap volatility risk if a Fed hiking cycle drives 10-year yields materially higher.
- Funding costs seen as the key transmission channel; median Russell 2000 WACC runs 54 bps above large caps, Bloomberg data showed.
- High yield spreads at 271 bps remained tight but have risen since August, a potential early warning for small caps.
- History showed small-cap outcomes track the 10-year: Russell 2000 fell 12% in the 2022 cycle as the 10-year rose 162 bps.
- Value historically led in the year after the first hike; energy outperformed in the past three cycles while real estate lagged.
