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Rising rates hit US smaller-cap stocks harder than large caps

In Q3 2026, US large caps delivered stronger returns than US small- and mid-caps, aligning with the idea that smaller firms refinance sooner.

Reported · Written up by our desk · Fund Industry

ETF Trends said equity markets in the third quarter of 2026 grappled with rising interest rates, with the impact varying across company sizes and sectors.

According to ETF Trends, US large-cap returns topped the group while US small- and mid-cap posted the weakest returns, which the outlet linked to shorter debt lifecycles at smaller companies that can lead to more frequent refinancing when yields rise.

ETF Trends also pointed to sector performance versus the S&P 500, noting that two of the four sectors with returns higher than the index, Technology and Communication Services, are home to mega-cap growth companies it views as more resistant to higher rates due to the cash flows they generate.

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