Mired in their worst losing streak in years, small caps could be the best way for investors to play crucial CPI data

Small-cap stocks have been under sustained pressure, with the Russell 2000 index enduring one of its longest losing streaks in years. That weakness has made the asset class a focal point ahead of Wednesday's release of September consumer-price index data, a report that could shape expectations for interest rates and, by extension, the outlook for smaller companies.

Stuart Kaiser of Citigroup recommends buying iShares Russell 2000 exchange-traded fund call options before the CPI print, according to the source. The logic reflects how small caps tend to be more sensitive to borrowing costs and domestic economic conditions than large multinationals, making them a potentially higher-beta way to express a view on inflation and rate expectations.

What to watch: whether the CPI reading shifts the rate narrative and whether small caps respond with a decisive move. Options positioning around the event could amplify volatility in either direction, so the development is best understood as a gauge of sentiment rather than a directional signal.