Citi analysts remain steadfast in their conviction that growth equities—embodied by the Nasdaq-100 (NDX)—offer a more defensive profile than small-cap names in the Russell 2000 (RTY). Here’s a deep dive into the technical and fundamental catalysts behind their preference.
1. Asymmetric Upside Capture
Over the past two years, NDX has not only risen more on market advances but also fallen less on sell-offs compared to RTY. Citi’s back-tested analysis shows that for every 1% of S&P 500 upside, Nasdaq gains approximately 1.3%, while it only gives back 0.8% on 1% S&P declines. By contrast, Russell 2000 tends to amplify downside losses—making growth stocks behave defensively when volatility spikes.
2. Earnings Revision Dynamics
Small-cap earnings forecasts have seen more pronounced downward revisions from a lower starting point, whereas Nasdaq-100 EPS downgrades remain in line with typical seasonal patterns. To monitor these shifts in real time, institutional investors often tap the FMP Ratios TTM Statement Analysis API—tracking aggregated EPS revision rates, forward P/Es and profitability metrics across sectors. This live feed helps quantify how rapidly analyst sentiment is diverging between large-cap growth and small-cap value.
3. Macro Backdrop Favors Large Caps
Citi points out that for Russell 2000 to outperform, markets would need a trifecta of upside economic surprises, lower interest rates, and a stronger U.S. dollar. Today’s data show muted GDP surprises, sticky yields, and a stable-to-weak dollar—conditions that historically tilt in favor of high-quality, rate-sensitive growth stocks with more resilient balance sheets.
4. Policy-Risk Insulation
Tariff volatility tends to erode earnings estimates—particularly for companies with narrow global supply chains. The Nasdaq-100’s concentration in global technology leaders and platform businesses provides greater scale and diversification, enabling them to absorb or pass through cost shocks more effectively than nimble small-caps.
5. Key Dates & Earnings Drivers
As we head into the heart of earnings season, keep an eye on the Earnings Calendar API for precise release dates of mega-cap tech names like Apple, Microsoft and Amazon. Timely tracking of earnings surprises and guidance trends will be crucial to validating whether growth’s defensive thesis holds under 2025’s evolving market conditions.
