Small-Cap ETFs' Moment to Shine

Consequently, most of the recent gains in the small-cap segment have been attributed to the belief that smaller companies may be better insulated from international trade disputes.

Looking beyond this short-term catalyst, the U.S. small-cap segment may continue to find support from an improving economic environment and strengthening fundamentals.

“In addition, while small caps generally sport higher valuations than large cap stocks, it’s worth remembering that they have a faster growth outlook. Wall Street’s consensus 2018 earnings expectations for the Russell 2000 Index stands at 25% versus only 11% for the large cap Russell 1000 Index according to ThomsonReuters as of March 9. Lastly, small caps have tended to be better late cycle performers than large caps, which may also help explain recent outperformance,” Young added.

For more information on small-capitalization stocks, visit our small-cap category.