IWM, which follows the Russell 2000 and is the largest small-cap ETF, is heavily allocated to cyclical sectors. Cyclicals usually perform well as rates rise. Financials, technology and industrial names combine for over half the ETF’s weight.

“Specifically, Gordon thinks that in the short term, IWM could fall back to near its 2015 high of around $129. This means that Gordon believes IWM could tumble 4 percent from its Monday levels, dropping back to levels unseen since November,” according to CNBC.

Following Election Day, investors flocked to IWM, IJR and rival small-cap ETFs as markets priced in President Donald Trump’s “America First” mantra that would help domestically-oriented companies led the next leg in economic growth.

Small-caps are also focused on the domestic economy and have less direct exposure to global geopolitical uncertainty and currency risks, as opposed to large-cap companies that have an international footprint, which may be affected by overseas risks and a strengthening U.S. dollar.

Tom Lydon’s clients owns shares of IWM.

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