The economic climate for small-cap value exchange traded funds could be right for the remainder of 2013. Smaller companies tend to deliver higher risk-adjusted returns than large-caps and could be a nice momentum play.

“Investors should note that small caps were underperforming in the early part of the second quarter but are now leading the way. Since small caps are considered to be the barometer of domestic economy, their dominance gives a bullish outlook for the U.S. in the near term,” Zacks Equity Research wrote. [Small-Caps and Consumer ETFs Reasserting Themselves]

Over the past three months, the iShares Russell 2000 (NYSEArca: IWM) has gained 7.4%, compared to the broad market SPDR S&P 500  (NYSEArca: SPY) that has added 4%. It has been noted that small-cap stocks tend to outperform large-caps during an economic recovery. Overall, this asset class also tends to add value to a portfolio, and reduces overall risk.

In general, the market is presenting investors with an uncertain outlook, as recent drama is Syria has subsided. Investors who want to focus in more on domestic stocks will benefit from small-cap ETF exposure, as these companies do not combine international diversification. Smaller companies represent their respective domestic market. [Small ETFs Pack a Big Punch]

The following ETFs are some of the top-ranked small-cap ETFs by Zacks. SPDR S&P 600 Small Cap Value ETF (NYSEArca: SLYV) is up 5.8% over the past three months, and up 20.6% in 2013. The financial and industrial sectors are top weightings. Vanguard S&P Small Cap 600 Value ETF (NYSEArca: VIOV) is up 6.4% and has gathered 21.5% year-to-date. Similar to SLYV, VIOV is heavy on the financial and industrial sectors. [ETF Spotlight: Small-Cap Value]

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