The Russell 2000 has surged 33.8% over the past 12 months, outpacing the S&P 500's 20% gain, but the rally is increasingly at risk from a 'higher for longer' Federal Reserve stance. Interest expense now consumes 31% of EBITDA for Russell 2000 companies, double the 2020 level, with nearly 30% of their debt tied to floating rates. Nearly 40% of these firms remain unprofitable, making them highly sensitive to borrowing costs. If rate cuts fail to materialize or the Fed tightens further, higher interest payments could squeeze profits and stall the small-cap revival.