Lingering concerns about the surge in COVID-19 cases, coupled with persistently high inflation, continue to taint investors' optimism surrounding the economic recovery, resulting in heightened stock market volatility. This is evident from the CBOE Volatility Index's (VIX) 76.5% increase over the past month.
While the looming interest rate hike may not bode well for small-cap stocks as higher rates would reduce their access to cheap capital, many market strategists believe small-cap stocks could be relatively safer bets amid the uncertainties surrounding the market. Though small-cap stocks tend to experience more volatility than mid-cap and large-cap stocks, they possess greater growth potential than larger companies. Investors' interest in small-cap stocks is evident from the Invesco S&P SmallCap 600 Equal Weight ETF's (EWSC) 10.1% returns over the past year.
