The improved economic conditions should also buoy small-caps and support their higher valuations. IWM is trading at a 20.96 price-to-earnings ratio, IJR has a 21.41 P/E and VB shows a 20.6 P/E.
“We need the US economy to rebound in the second half of year so small-cap sales and earnings growth remains strong and tops the large caps,” Steven DeSanctis, a small-cap strategist with Bank of America Merrill Lynch, said in the article. “With all of the big cuts in estimated growth, second half estimates could be easy to hurdle over.”
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For more information on small-capitalization stocks, visit our small-cap category.
Max Chen contributed to this article.
Full disclosure: Tom Lydon’s clients own shares of IWM and SPY.