Major small-cap ETFs, including the iShares Core S&P Small-Cap ETF (NYSEArca: IJR) and the iShares Russell 2000 ETF (NYSEArca: IWM), have been impressive in recent weeks. For example, IWM and IJR are up an average of 4% over the past month, prompting some technical analysts to call for more upside for small-cap equities.
Small-cap stocks were strengthening as traders renewed their outlook on the Trump administration’s pro-growth agenda. In recent weeks, U.S. markets have been roiled over uncertainty concerning President Donald Trump’s ability to push through pro-growth economic policies through Congress as the White House wades through political intrigue. However, the small-cap segment is recovering on expectations that the administration could overhaul the U.S. tax policy.
“The small-cap rally is far from done, says Todd Gordon of TradingAnalysis.com, who argues that the charts point to even more gains for the group tracked by the Russell 2000,” reports CNBC.
Tax reforms could also support smaller companies pressured by a weaker dollar. Small-cap earnings lagged behind the 10% jump for large-caps.
“To determine how high the Russell 2000 could rally, Gordon looks at the Russell-tracking IWM ETF. He says that the current consolidation in IWM could actually see a repeat of the last time there was a pullback. Essentially, Gordon points to a slight pullback in IWM at the beginning of September and says the slight drop in IWM at the beginning of this month mirrors the distance of the first,” according to CNBC.