Earnings, leverage and valuations are among the factors highlighting the durability of large caps and the potential vulnerabilities of smaller stocks.

US large-cap stocks, which comprise the Russell 1000 Index, generally have stronger balance sheets and lower leverage ratios that have proved a big help amid rising rates, widening credit spreads and increasing worries over historically very high levels of corporate debt,” said Young.

Additionally, the Russell 1000 Index, IWB’s underlying index, is seeing fewer negative earnings revisions than the small-cap Russell 2000.

“Large cap companies of the Russell 1000 Index have enjoyed a much slower pace of negative earnings revisions than their small cap counterparts comprising the Russell 2000 Index,” adds Young. “While Wall Street consensus profit projections have recently declined across the board, the downtrend has been less pronounced among large cap companies.”

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