Markets Climb Despite Tariff Rhetoric — Small Caps Lag but Show Signs of Catching Up

Published by SmallCap Network Editorial Team – July 14, 2025

Wall Street traded higher today, defying pressure from renewed trade war chatter. Despite former President Donald Trump’s strong rhetoric around reintroducing sweeping tariffs on Chinese imports if re-elected, the Dow Jones, S&P 500, and Nasdaq all closed in positive territory — showing resilience in the face of policy uncertainty.

Tariff Talk: Market Shrugs (For Now)
Trump’s call for a potential 60% tariff on Chinese goods sparked early morning jitters, but buyers stepped in as the trading session wore on. Investors appear more focused on strong labor data and optimism around Q2 earnings season than political noise — at least for today.

Dow Jones: +0.75%
S&P 500: +0.62%
Nasdaq Composite: +0.89%
“This was a classic wall-of-worry rally,” one SCN analyst noted. “Markets are acknowledging political risk, but the momentum is still being driven by tech strength and improving economic data.”

Small Caps Lag… But Opportunity May Be Brewing
The Russell 2000, the go-to index for U.S.-focused small caps, underperformed again, closing just slightly in the green. Rising interest rate concerns, inflation stickiness, and tariff-related uncertainty continue to pressure smaller companies — especially those with tighter margins.

But for contrarian investors, this divergence could signal a window of opportunity.

“Small caps are trading at a historically wide discount to large caps,” said an SCN contributor. “If rates stabilize and recession fears ease, these underloved names could snap back quickly.”
What to Watch in Small Caps

Domestic-focused companies that are less reliant on global trade may benefit from protectionist policies
Value-oriented small caps in energy, financials, and industrials are attracting bottom-fisher interest
Biotech and tech microcaps continue to show volatility — offering both risk and reward for traders

SCN Takeaway
While large-cap tech continues to lead the charge, don’t count out small caps just yet. With valuations near multi-decade lows and investor sentiment still muted, any shift in macro outlook could bring small caps back into focus in a big way.

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