**[Citi Warns of Rising Fed Rate Hike Risks: Small-Cap Stocks May Become the Next Sell-Off Target]** BlockBeats News, July 27: Citi's strategy team has warned that as expectations for Federal Reserve rate hikes intensify, small-cap stocks could become the "hardest-hit area" during market adjustments. With the Fed's new chairman, Kevin Warsh, adopting a more hawkish policy stance, the market is shifting from relying on forward guidance to focusing on economic data. Currently, market expectations for a Fed rate hike this week have risen to over 30%. Citi's Head of U.S. Equity Trading Strategy, Stuart Kaiser, stated that even if rates remain unchanged this week, the probability of a rate hike in September is still as high as 70%. Citi recommends that investors hedge risks by purchasing put options on the Russell 2000 Index ETF (IWM). Citi believes that small-cap stocks are more sensitive to interest rates, economic growth, and credit conditions. Under the Fed's hawkish signals, the Russell 2000 Index may face greater pressure compared to large-cap tech stocks. Meanwhile, data from Goldman Sachs shows that hedge funds are increasing their positions in the healthcare sector, with related funds performing strongly in recent periods. From August 2025 to April 2026, the average return rate of healthcare-focused hedge funds was close to 40%, significantly outperforming general equity funds. AI-driven drug development, rising M&A activity in the healthcare industry, and improved FDA approval efficiency are considered key reasons for the inflow of capital. This week, market attention remains focused on the Fed's policy meeting and earnings reports from major tech companies. Citi pointed out that the market currently has extremely high expectations for performance, and even if corporate earnings exceed forecasts, individual stocks may still decline due to "sell-the-news" reactions. [Original Link]