Small-Caps Could Deliver Big in 2023 | ETF Trends

Small-cap stocks and the related exchange traded funds topped their large-cap counterparts in 2022, stoking speculation that more of the same could be in the offing in 2023.

Should that prognostication prove accurate, ETFs such as the SPDR S&P SmallCap 600 ESG ETF (ESIX), among others, could benefit. ESIX, which follows the S&P SmallCap 600® ESG Index, enters 2023 with tailwinds, including the aforementioned 2022 out-performance of large-cap equivalents, as well as some important quality traits.

Additionally, there are signs more advisors and investors are turning to environmental, social, and governance (ESG) funds, including ETFs, as core holdings. For market participants that are seeking small-cap exposure, ESIX makes sense as a core holding due its relatively broad lineup — 378 holdings — and favorable annual fee of just 0.12%, or $12 on a $10,000 stake. ESIX’s value ties are also notable.

“One notable detail from last year’s stock market is that if you break down the lack of returns, there wasn’t much of a differentiator between large, medium, and small-cap stocks, said Dave Sekera, Morningstar’s chief US market strategist,” reported Business Insider. “Instead, investors spent the year shifting from growth to value stocks in an attempt to seek a safe haven. This adjustment has reshuffled the valuations of stocks in various sectors.”