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Small-Cap ETFs Could Derive Blue Wave Benefits

Tom Lydon
·2 min read

This article was originally published on ETFTrends.com.

With a sweep of the Senate runoff races in Georgia Tuesday, Democrats control the White House and both houses of Congress. That scenario could be beneficial to small-cap stocks and the related exchange traded funds, including the ERShares International Equity ETF (NYSEARCA: ERSX).

ERSX selects the most entrepreneurial, primarily Non-US Small Cap companies, that meet the thresholds embedded in their proprietary Entrepreneur Factor (EF). ERShares’ ETF delivers strong performance across a variety of investment strategies without disrupting investors’ underlying risk profile metrics. Their geographic diversity enables them to harness global advantages through additional returns associated with currency fluctuations, strategic geographic allocations, comparative trade imbalances, and relative supply/demand strengths.

Some market participants believe small caps will extend gains built late last year as Democrats uncork the spending spigot.

“Investors are betting a possible Democratic majority means more stimulus is coming and small-cap stocks will benefit because they are seen as more reliant on the pace of the economy than bigger shares,” reports Maggie Fitzgerald for CNBC.

Bet on Stimmy with ERSX

Small-cap stocks typically outperform increases in GDP, potentially setting the stage for more upside for ERSX as the U.S. economy shakes off the effects of the coronavirus pandemic.

“Small caps are more economically sensitive so the faster GDP grows, the more earnings growth we’re going to get in small caps,” said Steven DeSanctis, small- and mid-cap strategist at Jefferies.

Exchange traded funds that track value and small-capitalization stocks stood out Wednesday as investors raised bets on a more aggressive fiscal stimulus that would help generate greater economic growth.

Goldman Sachs analysts projected a Georgia win would allow the Democrats to add another $600 billion in stimulus spending on top of the $900 billion already in play.

“We’re looking for an additional $1 trillion of stimulus which translates to about one additional percentage point of GDP,” said DeSanctis. “Small outperforms large, value outperforms growth. Cyclicals over secular growth and bond proxies.”

The ERShares ETF selects the most entrepreneurial, primarily Non-US Small Cap companies, that meet the thresholds embedded in their proprietary Entrepreneur Factor (EF). ERShares’ ETF delivers strong performance across a variety of investment strategies without disrupting investors’ underlying risk profile metrics. Their geographic diversity enables them to harness global advantages through additional returns associated with currency fluctuations, strategic geographic allocations, comparative trade imbalances, and relative supply/demand strengths.

For more on entrepreneurial strategies, visit our Entrepreneur ETF Channel.

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