U.S. small-cap stocks and exchange traded funds, such as the iShares Core S&P Small-Cap ETF (NYSEArca: IJR) and the iShares Russell 2000 ETF (NYSEArca: IWM), have been trailing their large-cap counterparts in significant fashion this year. However, in recent days, traders have been nibbling at IWM.

Still, some market observers are leery of further upside for smaller stocks. 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.

Data suggest IWM, the largest ETF dedicated to smaller U.S. stocks, saw significant inflows last week. Both IWM and IJR have notched third-quarter inflows.

“Tax reform could also help lift smaller companies that are seeing a weaker dollar erode profits. Small caps posted flat earnings in the second quarter, compared with a 10 percent jump for large-cap firms, according to Steven DeSanctis, an equity strategist at Jefferies,” reports Elena Popina for Bloomberg.

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, investors pulled money from some major small-cap ETFs during the first quarter.

Frugal investors looking for low-cost, small-cap index funds have a growing number of options from which to choose, including the Schwab U.S. Small-Cap ETF (NYSEArca: SCHA).

Subscribe to our free daily newsletters!
Please enter your email address to subscribe to ETF Trends' newsletters featuring latest news and educational events.