Ahead of a potential rate hike by the Federal Reserve, a U.S. Senator has positioned his portfolio to be more heavily weighted on small-cap stocks, a potential dangerous play.

Senator Adds Small Cap Exposure

Sen. John Boozman (R-Ark.) recently disclosed a series of new stock and ETF trades, which can be found on the MarketDash Government Trades page.

Among the trades made by Boozman were swapping the iShares Core S&P 500 ETF Trust (IVV) for the State Street SPDR S&P 500 ETF (SPYM).

Boozman also sold positions in Johnson & Johnson (JNJ) and Constellation Energy (CEG).

New purchases included buying Otis Worldwide (OTIS) stock.

Trades that stood out from the disclosure include the buying of two small-cap stock ETFs, which were:

• Avantis US Small Cap Value ETF (AVUV)
• iShares Core S&P Small-Cap ETF (IJR)

Boozman disclosed buying $1,000 to $15,000 of each of the small-cap stock ETFs.

What makes this trade stand out is the potential timing.

The Federal Reserve is expected to raise rates on Wednesday. Past history shows that higher rates are often bad news for small-cap stocks.

Small-cap companies rely heavily on borrowing to fund their growth, and higher borrowing costs can quickly dampen that growth and affect earnings.

Boozman’s Trading History

Since 2023, Boozman has made over $3.8 million in stock and ETF transactions, according to data from Quiver Quantitative.

This includes more than 300 trades over the last four years.