The Best Small-Cap ETFs Leading Market's Charge

Small-Cap ETFs are leading the markets charge this year.

Year-to-date, the iShares Core S&P Small-Cap ETF (NYSEArca: IJR), which tracks the S&P Small-Cap 600 Index, increased 10.9%; the iShares Russell 2000 ETF (NYSEArca: IWM), which tracks the benchmark Russell 2000 Index, gained 9.2%; and Vanguard Small Cap ETF (NYSEArca: VB), which tracks the CRSP US Small Cap Index, rose 6.8%. In contrast, the S&P 500 was up 2.6% and and the S&P MidCap 400 Index was 4.1% higher so far this year.

Keeping the the small-cap’s momentum going, traders believed smaller companies were insulated from the overseas turmoil. A stronger U.S. dollar and concerns over weaker global growth also pushed investors toward smaller company stocks that tend to earn most of their money from a still growing domestic economy.

Small-Cap Outlook

Further supporting the small-cap outlook, the U.S. economy is still showing signs of growth with U.S. retail sales and consumer spending trends on the rise while the rest of the world is revealing weaker economic data. U.S. economic conditions are also more favorable for the domestically oriented small-caps as companies are still digesting the benefits of increasing deregulation and U.S. tax reforms.