Investors Dash Out of Small-Cap ETFs, Spooked by Selloff

Marquee small-cap exchange traded funds, including the iShares Core S&P Small-Cap ETF (NYSEArca: IJR) and the iShares Russell 2000 ETF (NYSEArca: IWM), have been widely highlighted as laggards among equity ETFs this year.

On a year-to-date basis, investors in S&P 500-tracking ETFs are enjoying returns of nearly 8% while IWM and IJR are higher by just 2.2% and 0.3%, respectively. Some investors are getting impatient with small-cap ETFs and are departing some of these products in significant fashion.

“Investors pulled $3.5 billion from the biggest exchange-traded fund that tracks the Russell 2000 Index last week, spooked by the steepest selloff in the domestically focused stocks since before Donald Trump’s surprise election win,” reports Dani Burger for Bloomberg.

The aforementioned IWM is the biggest ETF tracking the widely followed Russell 2000 Index. 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.

However, the market’s enthusiasm for small-caps has recently waned in dramatic fashion prompting some traders to call for more downside for the group.