Major large-cap equity benchmarks, including the S&P 500 and Nasdaq-100 have been volatile in recent days, but perhaps surprisingly, the small-cap Russell 2000 Index has been holding up fairly well.
That could eventually lead to good things for exchange traded funds, such as the iShares Core S&P Small-Cap ETF (NYSEArca: IJR) and the iShares Russell 2000 ETF (NYSEArca: IWM), among others.
“While the Dow Jones industrial average, S&P 500 and Nasdaq Composite have all fallen around 5 percent in the last week, the small-cap stock index has declined a little more than 4 percent,” reports CNBC. “On Wednesday, the Russell 2000 closed the day barely positive while the Nasdaq Composite, S&P 500 and Dow all closed in the red.”
IWM is the biggest ETF tracking the widely followed Russell 2000 Index. Following Election Day, investors flocked to IWM, IJR and rival small-cap ETFs as markets priced in President Donald Trump’s “America First” mantra that would help domestically-oriented companies led the next leg in economic growth.
Small-caps are also focused on the domestic economy and have less direct exposure to global geopolitical uncertainty and currency risks, as opposed to large-cap companies that have an international footprint, which may be affected by overseas risks and a strengthening U.S. dollar.