While the U.S. and China are embroiled in an escalating trade war, small-cap stocks and small-cap ETFs are outperforming.

Year-to-date, the iShares Core S&P Small-Cap ETF (NYSEArca: IJR), which tracks the S&P Small-Cap 600 Index, increased 13.2% and the iShares Russell 2000 ETF (NYSEArca: IWM), which tracks the benchmark Russell 2000 Index, gained 11.8% year-to-date while the S&P 500 was up 4.5%.

Supporting the small-cap’s recent run up, many traders believed smaller companies were insulated from the overseas turmoil. Furthermore, a stronger U.S. dollar and concerns over weaker global growth are also driving investors toward smaller company stocks that tend to earn most of their money from a still growing domestic economy.

“We continue to like small-cap equities because they have a more domestic focus, less impacted by trade or dollar fluctuations,” Angus Sippe, a fund manager at Schroders, told the Wall Street Journal.

The small-cap story is not solely concentrated in the U.S. For instance, even in Europe, where the stronger U.S. dollar has supported multinationals, the iShares MSCI Europe Small-Cap ETF (NasdaqGM: IEUS), which tracks the MSCI Europe Small Cap index, is flat so far this year, whereas the MSCI Europe Index is down 3.1%.

Related – Small-Cap ETFs: Not as Volatile as They Used to Be

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