Market volatility surges as small caps struggle to keep pace

In a recent government meeting, discussions centered around the performance of major stock indices for the quarter ending June 30. The S&P 500 saw a notable increase of 4.3%, although some participants expressed skepticism about this figure, attributing the rise primarily to just five stocks. In contrast, the Russell 2000, which tracks small-cap stocks, reported a decline for the same quarter.

Despite the lackluster performance of small-cap stocks in June, there was a significant rebound in July, with the Russell 2000 outperforming large-cap growth stocks by approximately 10%. However, this upward trend faced challenges in August, as volatility returned to the markets.

Participants in the meeting highlighted the expectation that market volatility will persist, particularly as the upcoming election approaches, suggesting that investors should prepare for continued fluctuations in stock performance.