ETF Investors Should Look to Small-Cap, Growth as Rates Rise

Those who are interested in gaining exposure to these potentially strong performing segments of the U.S. equities market can look to broad stock ETFs. For instance, the iShares Russell 1000 Growth ETF (NYSEArca: IWF) reflects growth-oriented companies taken from the benchmark Russell 1000 while the iShares Russell 2000 ETF (NYSEArca: IWM) focuses on the broad small-cap benchmark.

On the other hand, fixed-income assets have underperformed as the Federal Reserve increased its benchmark interest rates.

“Not surprisingly, bonds have not fared as well during periods of rising rates with the 10-year Treasury note losing an annualized 5.8% and investment grade corporate bonds gaining only slightly. However, given their significant exposure to the health of corporate credit, which tends to improve as the economy expands, corporate bonds have fared well posting 15% gains,” Young added.

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