Small Cap ETFs Take Hit After Russell 2000 Posts Worst Week in 2019
This article was originally published on ETFTrends.com.
Amid last week's selloff in U.S. equities that saw the Dow Jones Industrial Average post five losing sessions in a row, the markets were even rougher for small cap stocks as the Russell 2000 posted its worst week in 2019.
Wednesday, March 6 saw the index, which is a prime measure of small cap stock performance, fall 2 percent. This is a cause for concern to some analysts since a majority of small cap companies derive their revenue sources domestically, and their performance correlates well with investor confidence.
The trailing 1-week trailing total return for the iShares Russell 2000 Value ETF (IWM) showed a 1.61 percent decline. Similarly, the iShares Russell 2000 Value ETF (IWN) fell 2.02 percent and the iShares Russell 2000 Growth ETF (IWO) was down 1.24 percent in their 1-week trailing total returns.
Overall, however, all three are in the green thus far in 2019--IWM is up 17.09 percent year-to-date, while IWN is up 15.23 percent and IWO is up 18.77percent.
“Small-caps remain a very key component of the market’s comeback story,” said Frank Cappelleri, executive director at Instinet LLC, a Nomura company. “Seeing demand reignite in the most speculative names would give us a strong indication."
“If the divergence we’ve seen play out over the last two weeks continues, that’s a telling sign,” Cappelleri added.
Related: How Should Thematic ETFs be Weighted?
For investors looking for continued upside in large cap equities over small caps, the Direxion Russell Large Over Small Cap ETF (RWLS) offers them the ability to benefit not only from large cap equities potentially performing well, but from their outperformance compared to their small cap brethren.
Conversely, if investors believe that small cap equities will outperform large cap equities, the Direxion Russell Small Over Large Cap ETF (RWSL) provides a means to not only see small cap stocks perform well, but a way to capitalize on their outperformance versus their large cap brethren.
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