Small Cap ETFs Lead the Way In Recovery Periods | ETF Trends

Small-cap exchange traded funds (ETFs) are leading the charge as the markets begin to show tentative signs of recovery.

The downtrend in July was bucked by the iShares Russell 2000 Index (IWM) with a 3.3% gain, reports Trang Ho for Investor’s Business Daily. It handily outpaced the SPDRs (SPY), which lost 0.9%. Year-to-date, the Russell is down 6%, while the S&P is off by 13%.

Performing even better was the iShares Russell Microcap Index (IWC), which gained 4.6%.

If we continue to trend toward economic recovery, small-caps should perform best. That’s because their small size makes them more nimble and quicker to act when the conditions are favorable. The opposite is true, as well: when the going gets rough, riskier investments tend to be the first to go as investors seek refuge in blue chips.

Other small caps include:

  • SPA Market Grader Small-Cap 100 (SSK), down 10.3% year-to-date
  • First Trust Small Cap Core AlphaDEX (FYX), down 6.4% year-to-date
  • PowerShares Dynamic Small Cap (PJM), down 3.9% year-to-date
  • RevenueShares Small Cap (RWJ), up 2.7% since March 17 inception

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.