One of the more popular destinations for the $2 trillion added to U.S. equities since the election is starting to look wobbly.

A strong dollar and robust U.S. growth were supposed to be a boon for smaller, domestically focused stocks. But that hasn’t been the case as of late. The Russell 2000 Index has fallen 4.5 percent from its March 1 high, on pace for its worst month since October, data from Bloomberg show.

Hedge funds aren’t standing by to see if that turns around. Instead, large speculators tracked by the the Commodity Futures Trading Commission hold the most short Russell 2000 Index futures contracts since 2008. Taking into account long contracts, net positioning is its most bearish since May.

While it isn’t unusual for small-cap stocks to lead downturns versus more liquid and stable larger companies, what’s getting notice is their quick fall from grace.

Economic optimism had injected itself into the domestically-focused group. Hopes of infrastructure spending, deregulation and tax reform from the Trump administration sent the Russell 2000 surging 11 percent in November, the biggest monthly gain since 2011. As recently as Jan. 3, hedge funds had made record bullish bets on the Russell 2000, pushing net long contracts to more than 92,000, data from the CFTC show.

Now, investors are contending with near-record valuations, and the delay in pro-business support from Washington is throwing the gains into question, said Bruce Bittles, chief investment strategist at Milwaukee-based Robert W. Baird.

“Given that stock market valuations are historically high, it is widely believed that tax and regulatory relief is essential if corporate fundamentals are to catch up with stock prices,” Bittles said in a note to clients Monday. “Although corporate earnings are in recovery mode, which we believe will allow the long-term trend to continue, the near-term outlook argues for a period of consolidation.”

Another barometer for U.S. economic confidence -- the dollar -- has been starting to lose its grip, dragging small-cap stocks down with it. The dollar trade is tied to the hip of small caps, since the companies are far less exposed to foreign markets. The greenback has slumped almost 2 percent in March, close to erasing a more than 6 percent rally since Trump’s election in November.

Nervousness is also showing itself in exchange-traded funds. Action surrounding the most popular small-cap ETF picked up last week, as volume surged to its highest since right after the election. Traders are making adjustments to their small-cap holdings as volatility whips up for the first time since the election, said Eric Balchunas, an ETF analyst for Bloomberg Intelligence.

This article was provided by Bloomberg News.