Month of November Could Bring Big Gains for Small Stocks | ETF Trends

Count small-cap equities among the asset classes poised to be benefit after Election Day. The ERShares International Equity ETF (NYSEARCA: ERSX) too.

ERSX tracks 50 non-U.S. companies from around the world with market capitalizations between $300 million and $5 billion USD and the highest rank based on the six investment style factors.

“EntrepreneurShares has created a rules-based methodology that selects publicly-traded Entrepreneurial companies,” according to the issuer. “This procedure is applied in creating the Entrepreneur Non-US Small Cap Index. The Index is comprised of 50 Non-US companies form around the world with market capitalization based between $300 million and $5 billion USD.”

ERSX YTD Performance

“Small stocks are outpacing larger companies by the greatest amount in years so far this month, underscoring investors’ bets on Democrats gaining control in Washington and ramping up spending to support the economy,” reports Amrith Ramkumar for the Wall Street Journal.

High-Quality, Small-Cap Equities as the Days Get Shorter

With November just days away, so arrives the best six-month period in which to own stocks, a time frame that has historically favored small-cap equities. Investors looking to engage with smaller stocks with less risk and higher income opportunities can consider ERSX.

The size factor is one of the most durable themes in the factor space, but many investors overlook the benefits of focusing on higher-quality small-cap equities.

The small-cap Russell 2000 “has led this month even though smaller companies would be hard-hit by any new lockdown measures in the U.S. Earnings at these companies tend to rise and fall with the performance of the economy, but investors are anticipating that a victory by Democratic presidential nominee Joe Biden will lead to larger spending programs on everything from infrastructure to renewable-energy projects,” according to the Journal.

The tendency of factor leadership to change from year to year underscores ERSX’s utility: with the ERShares ETF’s multi-factor approach, investors don’t incur the burden of factor timing.

“Many investors are hopeful that greater fiscal spending can offset corporate-tax increases or greater regulation that many investors expect in a ‘blue wave’ scenario that sees Democrats win the White House and control in the Senate,” according to the Journal.

For more on entrepreneurial strategies, visit our Entrepreneur ETF Channel.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.