Expansionary fiscal policies have fueled inflation expectations, which have in turn raised bets on a Federal Reserve interest rate hike and strengthened the U.S. dollar. Consequently, with a stronger U.S. dollar, large-cap stocks may underperform as many large exporters find it harder to sell goods to foreign markets.

“Companies in the Russell 2000 index earn the lion’s share of their revenues in the U.S., and as such would presumably be among the biggest beneficiaries from President Donald Trump’s growth and tax reform agenda, and a stronger dollar,” according to Bloomberg.

A smart beta alternative to IJR and IWM is the Guggenheim S&P Smallcap 600 Pure Value ETF (NYSEArca: RZV), which has a heavily cyclical lineup. RZV targets companies that exhibit the value characteristic but focuses on the smaller companies taken from the S&P SmallCap 600 benchmark. Industrial, consumer discretionary and materials stocks combine for 57% of that ETF’s weight.

Tom Lydon’s clients owns shares of IWM.