Recession Fear Negligible: Will Small-Cap Growth ETFs Rally?

Goldman Sachs’ recent prediction may sooth the nerves of those who are worried about an impending recession in the United States. The bank said that the Federal Reserve’s dovish stance has reduced the probability of recession to just 10% over the next four quarters, from 20% at the end of 2018.

Federal funds rate projections for 2019 were trimmed to 2.4% from 2.9%, while the same for 2020 and 2021 was cut to 2.6% from 3.1%. For the longer term, the projected rate of 2.8% remains unchanged in December.

Economic data points have come in upbeat of late. U.S. employers added 196,000 new jobs in March, after an upwardly revised 33,000 in February. The number breezed past market expectations of 180,000. The unemployment rate was 3.8% last month, in line with market expectations. In March, average hourly earnings increased 4 cents to $27.70, after a 10-cent gain in February.

Manufacturing PMI in the United States increased to 55.3 in March from February’s 54.2. The reading also surpassed market expectations of 54.5 (read: U.S. Manufacturing Sector Grows in March: ETF & Stock Picks).

Sales of previously-owned homes hit an 11-month high in February, helped by subdued mortgage rates, higher income and more inventory. The month-over-month rise in sales was the biggest since December 2015.

In a nutshell, fundamentals are in favor of small caps as pint-sized stocks are more dependent on the health of the domestic economy. The U.S. economy has been in great shape compared with several other developed economies.

Given this, we highlight some small-cap growth ETFs that should do well in the coming days (see all Small Cap Growth ETFs here).

S&P Smallcap 600 Pure Growth Invesco ETF RZG

The underlying S&P SmallCap 600 Pure Growth Index measures the performance of securities that exhibit strong growth characteristics in the S&P SmallCap 600 Index. Healthcare (20.6%), Consumer Discretionary (17.1%), Information Technology (12.7%), Industrials (11.5%) and Financials (10.5%) are the top five sectors of the fund. The fund charges 35 bps in fees (read: 5 Beaten-Down ETFs & Stocks on Sale).

Vanguard S&P Small-Cap 600 Growth ETF VIOG

The underlying S&P SmallCap 600 Growth Index represents the growth companies of the S&P SmallCap 600 Index. The 338-stock fund charges 20 bps in fees. Industrials, Healthcare, Technology, Financials and Consumer Discretionary hold double-digit weights in the fund.

iShares S&P Small-Cap 600 Growth ETF IJT

The 336-stock fund looks to track the performance of the small-capitalization growth sector of the U.S. equity market. Like other two funds, those five sectors get the double-digit weights in the fund. The fund charges 25 bps in fees (read: 4 Reasons to Bet on Top-Ranked Small-Cap Growth ETFs).

Janus Henderson Small/Mid Cap Growth Alpha ETF JSMD

The underlying Janus Small/Mid Cap Growth Alpha Index selects small- and medium-sized capitalization stocks that are poised for smart growth by evaluating each company’s performance in three critical areas: growth, profitability and capital efficiency. The fund charges 35 bps in fees.

Want key ETF info delivered straight to your inbox?

Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
iShares S&P Small-Cap 600 Growth ETF (IJT): ETF Research Reports
 
Invesco S&P SmallCap 600 Pure Growth ETF (RZG): ETF Research Reports
 
Janus Henderson Small/Mid Cap Growth Alpha ETF (JSMD): ETF Research Reports
 
Vanguard S&P Small-Cap 600 Growth ETF (VIOG): ETF Research Reports
 
To read this article on Zacks.com click here.
 
Zacks Investment Research
 
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report