Core Viewpoint - The Russell 2000 index futures rose over 1% during the trading day [1] Group 1 - The increase in the Russell 2000 index futures indicates positive market sentiment among small-cap stocks [1]

Core Viewpoint - Hedge funds are increasingly betting against small-cap stocks due to concerns over U.S. economic resilience and inflation, as well as the impact of higher interest rates on these companies [1][4]. Group 1: Hedge Fund Activity - Hedge funds have collectively increased their short positions on small-cap stocks, with a total of $16 billion in short positions on the Russell 2000 Index, marking one of the highest levels since 2021 [1]. - The disparity between hedge fund positions on small-cap stocks and large-cap tech stocks, which are benefiting from the AI boom, is at its largest historically [2]. Group 2: Small-Cap Stock Sensitivity - Small-cap companies generally have weaker balance sheets and are more sensitive to changes in interest rates compared to larger companies in the S&P 500 [4]. - Despite a 26% rebound in the Russell 2000 Index since its low in April, there are concerns about whether the U.S. economy can sustain growth and support further increases in small-cap stock prices [6][7]. Group 3: Future Outlook - If the Federal Reserve begins a rate-cutting cycle and the U.S. economy remains resilient, small-cap stocks could outperform large-cap tech stocks, as they are highly sensitive to interest rate changes [5]. - Market sentiment suggests that the Fed may cut rates once, potentially by 25 to 50 basis points, rather than the previously anticipated three cuts totaling 75 basis points [7].

Group 1 - The Russell 2000 index futures declined by 1.8% [1]