IIWMiShares Russell 2000 Index Fund

IWM tracks the Russell 2000 — US small-cap companies, the most cyclical part of the market.

The index holds roughly two thousand smaller listed companies. Unlike large corporations, they less often earn abroad, more often borrow at floating rates and depend more on domestic demand. The fund therefore behaves as a bet on the American economy rather than on global business.

Interest-rate sensitivity follows from that: dearer credit hurts small companies far more than large ones with long fixed-rate debt. A meaningful share of index constituents are unprofitable, which amplifies moves in both directions.

IWM is liquid and widely used to express a view on the cycle — paired against a large-cap fund, it is used to bet on the gap between them widening or narrowing. For long holding periods cheaper funds on the same asset class exist.