Small-cap bullishness that started late last year is continuing to start 2021, raising the tide for exchange traded funds such as the ERShares International Equity ETF (NYSEARCA: ERSX).
ERSX selects the most entrepreneurial, primarily Non-US Small Cap companies, that meet the thresholds embedded in their proprietary Entrepreneur Factor (EF). ERShares’ ETF delivers strong performance across a variety of investment strategies without disrupting investors’ underlying risk profile metrics. Their geographic diversity enables them to harness global advantages through additional returns associated with currency fluctuations, strategic geographic allocations, comparative trade imbalances, and relative supply/demand strengths.
ERSX is up 11.7% year-to-date according to Morningstar data, and there are reasons to believe that performance is more floor than ceiling.
“Things started to shift in November, when positive vaccine trial results led to hopes that the COVID-19 pandemic could soon be curtailed. Suddenly, smaller firms – whose stocks were cheaper – started to look like they could deliver higher returns in 2021 as the economy recovered,” according to Business Insider.
ERSX: Built for the Current Environment
The near-term market setting is conducive to small cap strategies like ERSX.
“More stimulus, a lower dollar and higher inflation breakeven rates will help industrials, materials and financials and hurt tech … These sectoral views favor small-cap equities and value stocks,” according to BCA Research.
The Entrepreneur Non-US Small Cap Index is comprised of 50 Non-US companies from around the world with market capitalizations between $300 million and $5 billion USD.
While small cap value appears to be solidifying, that doesn’t mean growth is going to lag. Fortunately ERSX addresses both factors.
ERSX can also benefit from structural shifts in the economy, with its technology exposure and allocations to cutting edge healthcare companies. Another tailwind is the Federal Reserve signaling it will do what it takes to support the economy.
“Whatever the opportunities for innovative companies, policymakers – from the President to Federal Reserve officials – last week made it clear that they would keep up economic support,” adds Business Insider.
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.