Small Caps Lead the Earnings Race, But Not By Much

While equities are rebounding, it’s a race between large caps or small caps to see which can return to normalcy the quickest. When it comes to earnings, small caps have the lead thus far, but not by much.

“Neither small- or large-cap stocks have taken the lead in the stock market since mid-July when earnings season kicked off,” a Business Insider article noted. “Yet smaller names are printing slightly stronger earnings results, the team wrote. The share of companies beating estimates surged in the Russell 2000 as it did for the S&P 500, but the uptick was more extreme among small-cap equities than large-cap stocks. The rate of upward earnings estimate revisions has also surged for small-caps.”

“All in all, small-cap stocks are experiencing a slightly stronger recovery in earnings, but investors have mostly looked through the outperformance and kept the small-versus-large trade relatively even, RBC said,” the article added.


^ZAESCUTR data by YCharts


^ZAELCUTR data by YCharts

Small Cap ETF Exposure

Investors looking for small cap exposure can look to funds like the iShares Russell 2000 Growth ETF (NYSEarca: IWO). IWO seeks to track the investment results of the Russell 2000 Growth Index, which measures the performance of the small-capitalization growth sector of the U.S. equity market.

After being the epicenter of the coronavirus pandemic, China is offering small cap investors opportunities as well. One fund to look is the Xtrackers CSI 500 China A-Shares Small Cap ETF (NYSEArca: ASHS).

ASHS seeks investment results that correspond generally to the performance, before fees and expenses, of the CSI 500 Index. The index is designed to reflect the price fluctuation and performance of small-cap companies in the China A-Share market and is composed of the 500 smallest and most liquid stocks in the China A-Share market. U

Under normal circumstances, the fund invests at least 80% of its net assets, plus the amount of any borrowings for investment purposes, in A-Shares of Chinese small-cap issuers or in derivative instruments and other securities that provide investment exposure to A-Shares of Chinese small-cap issuers.

On the other side of the equation, investors who want large cap exposure can look at the Xtrackers Russell 1000 US QARP ETF (QARP). QARP seeks investment results that correspond generally to the performance of the Russell 1000 2Qual/Val 5% Capped Factor Index, which is designed to track the equity market performance of companies in the United States selected on the investment style criteria of quality and value.

For more market trends, visit ETF Trends.