Nearly 40% of Russell 2000 companies are losing money, bringing back memories of the worst days of the 2008 crisis. This shows there is serious trouble brewing beneath the surface.
By the second quarter of 2025, 42% of these firms reported negative earnings, way up from 14% twenty years ago. But it’s not just about how many are unprofitable. A lot of these companies carry risky debt with high interest rates, which means they are spending more just to keep up. Interest costs are expected to hit close to one trillion dollars this year, almost three times what they were in 2020. https://www.crfb.org/blogs/interest-costs-could-explode-high-rates-and-more-debt
Looking closer at sectors, tech startups and small industrial companies are feeling the heat the most. These businesses often borrow heavily to grow, and rising interest rates hit them especially hard.
At the same time, retail investors keep jumping in, buying the dip and hoping for a turnaround. This is usually driven by fear of missing out or chasing fast profits, but history tells us that can end badly when the fundamentals are weak.
The reality is many Russell 2000 companies aren’t pushing innovation or expanding. They are barely hanging on. With soaring interest payments, the whole situation looks shaky for investors and the market alike. https://www.visualcapitalist.com/the-share-of-u-s-companies-with-negative-earnings/
This is where retail investors (bagholders) enter the scene. 👇🏼 pic.twitter.com/m9uAZHz1Cu
— Kalani o Māui (@MauiBoyMacro) August 10, 2025
US loan default rates tell two very different stories:
– Including distressed LMEs: 4.56%
– Excluding distressed LMEs: 1.25%
– LME count: 5 (June 2022) → 37 (July 2025)Sometimes the real default rate is what you don't count
Source: PitchBook pic.twitter.com/eJI02JyNlj
— junkbondinvestor (@junkbondinvest) August 10, 2025