A Different, Stealthier Spin on the January Effect

ETF Trends

The S&P 500 is off 0.6% to start 2014, and with that, there would appear to be diminished chances for a legitimate January Effect to materialize.

After all, time is running out on January, but there is some good news and it may not be getting the attention it deserves. The January Effect is the scenario where small-caps lead large-caps in the first month of the year, setting the broader market up for a (usually) positive result for the year. [ETFs and the January Effect]

Good news: The iShares Russell 2000 ETF (IWM) is up 0.5% since the start of year. Good news Part II: The iShares Russell 2000 Growth ETF (IWO) has climbed 1.7% since 2014 started. IWO ranks as the ninth-best broad market ETF in 2014.

The good news for those worried about the lack of a January Effect does not end there. Small-caps are not just outpacing the S&P 500, but micro-cap ETFs have been noticeably more impressive than their small-caps peers. Off the top four broad market ETFs to start 2014, two are micro-cap funds, according to Dorsey Wright & Associates data.

That pair is comprised of the Guggenheim Wilshire Micro-Cap ETF (WMCR) and the iShares Microcap ETF (IWC) . WMCR is up 4% and touched its price in six and a half years last Friday. IWC, the largest micro-cap ETF by assets, has gained 3% year-to-date. [Embrace Micro-Cap ETFs Before January]

The PowerShares Zacks Micro Cap Portfolio (PZI) is up 1.5% this year and like WMCR, is flirting with multi-year highs. A frequent criticism of micro-cap ETFs is that these funds are often short on true micro-caps, a designation that ends at the $300 million in market value level.

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