Market Correlations Shift: Russell 2000 Hits Negative Correlation with 10-Year Treasury Yield, S&P 500 Diverges, BTC Drops from 55% to 25%

Recent analyses reveal significant shifts in market correlations, particularly among small-cap stocks and major indices. The rolling one-year correlation between the Russell 2000 index and the 10-year Treasury yield has reached a deep negative territory, a level not seen since 1997. This indicates that small-cap stocks are increasingly sensitive to changes in interest rates rather than economic growth. Furthermore, the correlation between the market-cap-weighted S&P 500 and its equal-weighted counterpart has diminished drastically, registering close to zero for the first time in two decades. This trend highlights a divergence in performance between larger and smaller companies within the index. Additionally, the correlation between cryptocurrencies, specifically Bitcoin (BTC) and Ethereum (ETH), and U.S. equities has also decreased notably over the past two months, with Bitcoin's correlation dropping from 55% to 25%. These trends suggest a complex and evolving relationship among various asset classes in the current market environment.