ETF Trends
ETF Trends

After the recent market hubbub, small capitalization stocks and related exchange traded funds are pulling ahead, and some investors are taking notice.

The iShares Russell 2000 ETF (NYSEArca: IWM) has rebounded after testing its 200-day moving average, outpacing its large-cap counterpart. Over the past week IWM was up 1.5% while the S&P 500 was 0.8% higher.

“There’s a lot of value in small-cap land if you can look through the rubble,” St. Denis Villere III, portfolio manager at Villere & Co., told Reuters.

ETF investors are also jumping back onto the small-cap train, with IWM attracting close to $2 billion in net inflows over the past week, according to XTF data.

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.

“For small-cap companies that are essentially the ones paying the highest taxes, any positive update on Trump’s plan to lower taxes is a big deal,” Walter Todd III, chief investment officer at Greenwood Capital Associates LLC, told Bloomberg. “This combined with the underperformance of small-cap stocks in the past four weeks now gives small caps a nice rally, though it’s too early to tell how durable the rally is.”

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