Small-capitalization stocks and related exchange traded funds are beginning to take the lead after the recent pullback. Investors who remain wary of further weakness may consider a smart-beta strategy that focuses on better fundamentals to help drive enhanced returns over the long run.
The benchmark Russell 2000 and the small-cap segment has been taking the lead after the recent selling, with many ETF investors jumping back onto the small-cap theme in recent weeks.
Furthermore, small-cap stocks were strengthening as traders renewed their outlook on the Trump administration’s pro-growth agenda. In recent weeks, U.S. markets have been roiled over uncertainty concerning President Donald Trump’s ability to push through pro-growth economic policies through Congress as the White House wades through political intrigue. However, the small-cap segment is recovering on expectations that the administration could overhaul the U.S. tax policy.
However, given the ongoing uncertainty, many still anticipate lingering volatility in the small-cap recovery, especially as smaller companies are traditionally much more at risk than their more solid and stable large-cap counterparts.