In general, when an economy and market recovers, it is the small-cap stocks and the exchange traded funds (ETFs) that track them that lead the recovery, but is this the case in the current market uptrend?
Small-cap stocks are those with a market capitalization of less than $1 billion. These companies rely on fewer products, have less available cash and are generally more risky than larger companies. But on the plus side, small-cap companies tend to be more nimble and quick to react as market conditions shift.
Matt Krantz of USA Today says that history this time is proving to be correct: small-cap stocks that are leading the recovery effort. In fact, small caps are up nearly 70% from their March lows, whereas the larger stocks have gained nearly 45%. This can further be evidenced through the performance of the following small-cap ETFs:
- Vanguard Small-Cap Value ETF (VBR): up 21.1% year-to-date
- PowerShares Dynamic Small Cap (PJM): up 8.5% year-to-date
- iShares Russell 2000 (IWM): up 19.5% year-to-date
For more stories on small-cap ETFs, visit our small-cap category.
Kevin Grewal contributed to this article.
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.