Small-cap stocks have underperformed large caps lately. The Russell 2000 is down 5.2 percent in the past week and 6.8 percent in the past month, versus S&P 500 declines of 3 percent and 5.3 percent, respectively.
The small-cap lag comes despite a market environment in which smaller companies might be expected to do better. After all, one of the biggest current worries is global growth, and Russell 2000 businesses tend to be more domestic-focused than those in the S&P 500.
But to Boris Schlossberg of BK Asset Management, the recent dive in the Russell reflects market dynamics more than fundamental factors.
Schlossberg argues that due to the prolifation of ETFs, many individual investors who might previously have been invested in individual small-cap stocks are now in large caps instead. That means that swift-moving hedge funds play a greater role in that segment of the equity market.