ETF Trends
ETF Trends

With all that has been going on in the world, small-cap equities and related exchange traded funds (ETFs) quietly hit recent highs in April, but the month of May was not as kind for the asset class.

The iShares Russell 2000 (NYSEArca: IWM) is down 3.9% in the past month, Vanguard Small-Cap ETF (NYSEArca: VB) is down 4.1% in the past month and iShares S&P SmallCap 600 (NYSEArca: IJR) is down 3.3% in the past month.

Small-cap equities lost ground in May, with the Russell 2000 losing 5.1% in the month, but ending the month down about 2%, reports Howard Gold for MarketWatch. As the benefits of the Fed’s QEII begin to dwindle away in June, investors have been dumping risky assets, including small-caps. [Small-Cap ETF Falls Through 50-Day Average.]

Meanwhile, institutional investors have been throwing money back into large-cap stocks, more notably blue-chip stocks. Additionally, defensive plays, such as health care, consumer staples and utilities, have experienced strong investor interest.

Manager of small- and large-growth stocks, Louis Navellier, believes that “small caps are better between November and April” but the asset class will likely lag during the summer months when the markets generally underperform in this period – as the saying goes, “sell in May and go away.” Navellier cautions on a “big correction this summer,” but come November, he’ll “be buying small caps like crazy.”

For more information on small-caps, visit our small-cap ETFs category.

For full disclosure Tom Lydon’s clients own IWM, VB and IJR.
Max Chen 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.