Small stocks, once considered the main beneficiary of President Donald Trump’s policy, entered bear market territory on Thursday after a massive stock market crash in the country’s government followed by a massive stock market crash.

this Russell 2000 Index It fell more than 5% on Thursday, with losses caused by nearly 21% from the Nov. 25 record. On Wall Street, a 10% pullback is considered a correction, but a 20% drop is a bear market. this S&P 500 and Nasdaq Composite Materials They are all in the corrective field, and Dow Jones Industrial Average Under this mark.

“They were hit by the weakening of the economy. It would hurt profits,” Truist co-host investment officer Keith Lerner told CNBC. “On the other hand, they still pay high debt interest payments because they have more floating rate debt.”

“They were squeezed on both sides,” he said.

This is a clear reversal of the gains seen in trading dates after the November election, and the little hat is seen as Beneficiary Since the group has fewer multinational corporations than large stocks, it is deregulated, with lower tax rates and even tariffs.

Russell ended the election week in 2000 with an 8.6% improvement, up 4.7% from the S&P 500 weekly, almost 4 percentage points higher. With that, it became one of Trump’s hottest deals. In fact, Tom Lee, managing partner and research director at Fundstrat, said at the time that the little hat could outperform More than 100% in the next few years.

But the Russell 2000 was dragged to Thursday’s lower name Victoria’s Secret and City Clothingit sourced many products from other countries and may find that the fees are significantly higher and the profit margins of tariffs are lower.

Given its smaller size, the group is particularly sensitive to economic transformation and therefore has less financial flexibility as a large stock. JPMorgan predicts if Trump Brand new reciprocity tariffs Keep it, the U.S. economy will Possible to fall into recession.

Russell (Russell 2000 Tariff Plan Increasing attention on the streets of slowing economy.

“In the first half of the recession, the small hats usually fell 13%, so it’s already worse than where we are in a normal recession,” said Steven Desanctis, an equity strategist for Jefferies’ small and medium-sized companies in an interview with CNBC. “For a normal bear market, the little hats fell 26%, so we are close to that number.”

Where is the bottom?

Despite the turmoil in the small hat at the moment, DeSanks believes the group can eventually find the bottom, especially if the Fed starts to lower interest rates again.

Currently, traders are priced at 58.5%, with a quarter-point chance of cutting by the end of 2025, with the next chance of cutting more than 90%, at the Central Bank’s June meeting, according to CME FedWatch Tool.

“If the economy gets weak enough, will we get the support of the Fed? We say yes. It’s usually good for small hats,” the stock strategist said.

Desanctis added that the first two quarters here may look like a “hard” first two quarters, even though there is no recession, before the Fed may rescue in the summer. From there, he expects that some of the issues surrounding tariffs (which may increase the cost of input for businesses) may be addressed, prompting the market to focus on deregulation again.

Lerner, who was underweight, was also constructive. He noted that aside from deregulation, more focus on tax cut expansion and the return of animal spirits, leading to the collection of mergers and acquisitions should also provide opportunities for Little Hats to do well later this year, or whenever investors think the worst is behind.

More importantly, because things are “don’t move straight”, it’s not surprising for small hats and big hats, and you’ll see “oversold bounces” soon.

Lerner does not think that the big hat will face a similar fate to the bear market territory like the small hat. The S&P 500 is still quite far from the bear market, with higher than 11% on February 19.

“Since the little hats fell 20%, it tells you they’ve collapsed – the bear market didn’t start from here. It’s been going on for months,” the league said. “Accordingly, the big hats have also dropped, but about half the hats relative to the little hats. Our big hat basic case is that you might see the downside further, but we don’t ask for the bear market.”