New Small-Cap ETF May Have Arrived at the Right Time | ETF Trends

Some exchange traded funds benefit from good timing, while others need time to be adequately appreciated by investors. It remains to be seen in which camp the Invesco NASDAQ Future Gen 200 ETF (QQQS) will dwell, but it’s not a stretch to say QQQS is well-timed because although small-cap stocks are beaten up this year, some market observers are more optimistic about the recovery prospects for these equities than large-cap counterparts.

QQQS, which debuted last week, follows the Nasdaq Innovators Completion Cap Index and is the latest addition to the Invesco QQQ Innovation Suite – a group comprised of established ETFs such as the Invesco QQQ Trust (QQQ), the Invesco NASDAQ 100 ETF (QQQM), the Invesco ESG NASDAQ 100 ETF (QQMG), the Invesco NASDAQ Next Gen 100 ETF (QQQJ), and the Invesco ESG NASDAQ Next Gen 100 ETF (QQJG).

On that note, QQQS has compelling DNA, and it could prove to be an attractive avenue for investors to bet on small-cap stocks that are primed for promotion to QQQJ and QQJG and, later, QQQ and QQQM. Over the near- to medium-term, QQQS could be worth considering small-caps could be the first corner of the equity market to rebound from the current malaise.

“Small-caps appear to be following a familiar pattern, underperforming before a recession and then outperforming coming out of one. That was the case in 1990, 2001, 2008, and 2020, according to Lori Calvasina, chief U.S. equity strategist at RBC Capital Markets, when small-caps fell more than large-caps heading into the recessions before outperforming on the way out,” reports Jacob Sonenshine for Barron’s.

Two more points to consider that could work in favor of QQQS. First, with growth stocks battered this year, the group could be offering investors some value – something that’s often hard to locate in the small-cap space. Second, the dollar is strong and showing little sign of relenting. Owing to their domestic focus, smaller companies are usually less vulnerable to a strong greenback than large-cap equivalents.

The domestic tilt of QQQS is fortified by a 55.65% weight to the healthcare sector. Additionally, some market observers claim small-earnings growth will outpace that of large companies, potentially providing a spark for some QQQ components to rally.

The rookie Invesco ETF holds 199 stocks and charges 0.20% per year or $20 on a $10,000 investment.

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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.