Small Caps Get Crushed: IWM Sees $3.3B Outflow as Treasury Yields Surge
Investors are pulling billions of dollars from small-cap stocks as rising Treasury yields put renewed pressure on companies more exposed to borrowing costs. The iShares Russell 2000 ETF (NYSE: IWM ) recorded $3.3 billion in outflows last week, according to a post on X by The Kobeissi Letter, marking its second-largest weekly withdrawal of 2026 and third-largest in nine years. The exodus comes as small caps have sharply lagged their large-cap counterparts. The S&P 500 has outperformed the Russell 2000 for five consecutive weeks, according to Kobeissi. If the trend continues for another week, it would become the longest stretch of S&P 500 outperformance over small caps in eight years. The Russell 2000 has also weakened significantly since mid-August, falling 7.3% and reaching its lowest level since June 10, Kobeissi said. Small-cap stocks are seeing massive outflows: The Russell 2000 ETF, $IWM, posted -$3.3 billion in outflows last week, its 2nd-largest weekly outflow this year. This also marks its 3rd-largest weekly withdrawal in 9 years. This comes as the S&P 500 has outperformed the Russell… pic.twitter.com/cEafgwdPgJ — The Kobeissi Letter (@KobeissiLetter) September 24, 2026 The
Investors are pulling billions of dollars from small-cap stocks as rising Treasury yields put renewed pressure on companies more exposed to borrowing costs. 3 billion in outflows last week, according to a post on X by The Kobeissi Letter, marking its second-largest weekly withdrawal of 2026 and third-largest in nine years. The exodus comes as small caps have sharply lagged their large-cap counterparts. The S&P 500 has outperformed the Russell 2000 for five consecutive weeks, according to Kobeissi.
If the trend continues for another week, it would become the longest stretch of S&P 500 outperformance over small caps in eight years. 3% and reaching its lowest level since June 10, Kobeissi said. 3 billion in outflows last week, its 2nd-largest weekly outflow this year. This also marks its 3rd-largest weekly withdrawal in 9 years.
com/cEafgwdPgJ — The Kobeissi Letter (@KobeissiLetter) September 24, 2026 The pressure is particularly notable because IWM remains a substantial vehicle for small-cap exposure. 6 billion in net assets as of Sep. 23, with nearly 2,000 holdings tracking the Russell 2000. The rate backdrop has become increasingly challenging.
17% on Thursday, its highest level since July 2007. Independent Treasury data also show the 10-year yield reached nearly 5% earlier this month. Higher yields can weigh disproportionately on smaller companies because they tend to face higher financing costs and have less balance-sheet capacity than mega-cap companies. MarketWatch recently noted that the Russell 2000 has been particularly sensitive to the rise in borrowing costs, while the S&P 500 has held up better.
09, its lowest level on record, underscoring how sharply small caps have trailed growth-heavy large caps. For ETF investors, the latest IWM outflows show that the small-cap weakness is no longer confined to index performance. Capital flows are increasingly reflecting the same preference for large-cap exposure as Treasury yields climb. Read Also: 10-Year Yields Hit 19-Year Highs Due to ‘Booming' Economy, Yardeni Says Photo: Shutterstock