The smaller companies and small-cap exchange traded funds (ETFs) are beginning to pull ahead.
Over the past week, the Russell 2000 Index rose 3.4% while the S&P MidCap 400 Index gained 3.2% and S&P 500 added 2.1%.
The small-cap segment has been gaining momentum in recent months, jumping on the risk-on sentiment after the Fed stated it would only hike interest rates two times later this year, or downwardly revised from the four hikes it expected back in December. The extended low-rate environment has also been a boon for smaller companies that have capitalized on cheap debt in their balance sheets.
Related: ETFs In 2016: Large Cap vs. Small Cap
Small-caps, though, can still navigate through a slowly rising rate environment. Smaller companies, which focus on U.S. markets, are less exposed to a stronger U.S. dollar as rates rise, which would more negatively affect larger corporations with a global footprint. Additionally, periods of rising rates also coincide with expanding economies, which often benefit smaller companies.
[related_stories]Over the long-haul, small-caps have historically outperformed.
“Small-cap stocks have earned a return premium of about 2% over large-cap stocks since 1926,” according to Morningstar analyst Michael Rawson. “However, this premium can vary drastically over time and has become smaller in recent decades.”
Related: An Unexpected Strength Of Small Cap ETFs
Investors interested in the small-cap category have a number of broad ETF options available.
Small-cap ETFs:
- iShares Russell 2000 ETF (NYSEArca: IWM)
- iShares Core S&P Small-Cap ETF (NYSEArca: IJR)
- Vanguard Small Cap ETF (NYSEArca: VB)
- Schwab U.S. Small-Cap ETF (NYSEArca: SCHA)
- WisdomTree SmallCap Dividend Fund (NYSEArca: DES)
- Schwab Fundamental U.S. Small Company ETF (NYSEArca: FNDA)
- Vanguard Russell 2000 ETF (NYSEArca: VTWO)
- SPDR S&P 600 Small Cap ETF (NYSEArca: SLY)
- First Trust Small Cap Core AlphaDEX Fund (Nasdaq: FYX)
- PowerShares S&P SmallCap Low Volatility Portfolio (NYSEArca: XSLV)
- WisdomTree SmallCap Earnings Fund (NYSEArca: EES)
- Oppenheimer Small Cap Revenue ETF (NYSEArca: RWJ)
- Vanguard S&P Small-Cap 600 ETF (NYSEArca: VIOO)
- iShares Morningstar Small-Cap ETF (NYSEArca: JKJ)
- PowerShares DWA SmallCap Momentum Portfolio (NYSEArca: DWAS)
- SPDR Russell 2000 ETF (NYSEArca: TWOK)
- SPDR Russell 2000 Low Volatility ETF (NYSEArca: SMLV)
- WisdomTree U.S. SmallCap Dividend Growth Fund (NasdaqGM: DGRS)
- Compass EMP U.S. Discovery 500 Enhanced Volatility Weighted Index ETF (NasdaqGM: CSF)
- iShares Enhanced U.S. Small-Cap ETF (NYSEArca: IESM)
- AlphaMark Actively Managed Small Cap ETF (NasdaqGM: SMCP)
- Compass EMP US Small Cap High Dividend 100 Volatility Weighted Index ETF (NasdaqGM: CSB)
- PowerShares Russell 2000 Equal Weight Portfolio (NYSEArca: EQWS)
- Compass EMP US Small Cap 500 Volatility Weighted Index ETF (NasdaqGM: CSA)
- iShares FactorSelect MSCI USA Small-Cap ETF (NYSEArca: SMLF)
- ProShares Russell 2000 Dividend Growers ETF (NYSEArca: SMDV)
- ETFS Zacks Earnings Small-Cap U.S. Index Fund (NYSEArca: ZSML)
Leveraged/inverse small-cap ETPs:
- Direxion Daily Small Cap Bull 3X Shares (NYSEArca: TNA)
- Direxion Daily Small Cap Bear 3X Shares (NYSEArca: TZA)
- ProShares UltraShort Russell 2000 ETF (NYSEArca: TWM)
- ProShares Short Russell 2000 ETF (NYSEArca: RWM)
- ProShares UltraPro Short Russell 2000 ETF (NYSEArca: SRTY)
- ProShares UltraShort Small Cap 600 ETF (NYSEArca: SDD)
- ProShares Short Small Cap 600 (NYSEArca: SBB)
- ProShares Ultra Russell2000 (NYSEArca: UWM)
- ProShares UltraPro Russell2000 (NYSEArca: URTY)
- ProShares Ultra SmallCap600 ETF (NYSEArca: SAA)
- UBS ETRACS Monthly Pay 2xLeveraged Small Cap High Dividend ETN (NYSEArca: SMHD).
- Direxion Daily Small Cap Bull 1.25X Shares (NYSEArca: LLSC)
- Direxion Daily Small Cap Bull 2x Shares (NYSEArca: SMLL)
- iPath Long Extended Russell 2000 TR Index ETN (NYSEArca: RTLA)
For more information on the small-cap segment, visit our small-cap category.