“So compared to history, neither valuation ratios nor the duration of the bull market seem to be at extremes,” Goodwin said.
Lastly, the expected volatility may be seen as another indicator of the small-cap’s run or potential for a stumble ahead. A high expected volatility would be a signal for hurdles to come, and the current CBOE Russell 2000 Volatility Index shows forward looking options are currently hovering near historically low levels or are reflecting a relatively subdued volatility outlook.
A unique small-cap ETF play is the Oppenheimer Small Cap Revenue ETF (NYSEArca: RWJ).
RWJ follows a revenue weighting methodology, which could provide diversified exposure to the market, is not influenced by stock price, reflects a truer indication of a company’s value and offers stable sector exposure. Moreover, revenue weighting may provide a more value-oriented portfolio and historically outperformed in a value-driven market while showing lower drawdowns during growth-driven markets.
For more information on the small-capitalization market, visit our small-cap category.