PowerShares S&P 500 High Beta (NYSEArca: SPHB) is up nearly 11% the past month to outperform the S&P 500 and the low-volatility ETF. The high-beta ETF tends to focus on riskier, cyclical sectors.
Indeed, U.S. companies with the most debt are rallying more than any time in almost four years versus the rest of the stock market, Bloomberg reports.
S&P 500 companies with the lowest working capital, smallest earnings and highest debt ratios have jumped 27% this year, almost double the gains for businesses with the most cash and least borrowing, according to the story.
“The rally is so broad that the weakest companies that hadn’t been participating have finally caught fire and roared ahead,” said Anthony Lawler, a fund manager at GAM Holding, in the Bloomberg article.
“The catch-up is greater in stocks with weak balance sheets,” added Hayes Miller at Baring Asset Management. “Investors by and large feel they have to gain greater exposure to equities.”
Full disclosure: Tom Lydon’s clients own SPY.