Yahoo Finance Are the Tables Turning for Small-Cap ETFs?
The mega-cap tech rally did not let U.S. small-cap stocks raise their heads high this year. In fact, one measure showed large-cap stocks beating smaller companies by the widest margin in 25 years, per a Wall Street Journal article. The Russell 2000 is up 4% this year and has gained the same past month. In comparison, the tech-heavy Nasdaq has added 26.5% this year and has jumped 8.2% past month.
But are tables turning for the pint-sized stocks? Let’s find out.
The Debt Deal Is Done
The Senate passed a bill late Thursday evening to suspend the nation's debt limit through Jan 1, 2025, averting the first-ever U.S. default just days ahead of the deadline. The House had passed the deal earlier last week. This has chances of boosting overall investor risk appetite, propelling cyclical stocks and small-cap stocks.
Personal Savings Rising From the Year-Ago Level
U.S. consumers have been able to maintain savings despite high inflation. Though the savings rate dropped 4.1% in April from 4.5% in March, the level has been hovering in the more than 4% range this year. This marks a huge jump from the one-year low of 2.7% we saw in June 2022. Households are drawing down excess savings cautiously, likely due to recession concerns.
Upbeat Jobs Data
The U.S. economy added 339,000 jobs in May 2023, the maximum in four months, and breezing past market forecasts of 190,000. Figures for March and April were revised up, bringing employment 93,000 higher than previously reported. Figures hint at a tight labor market, with employment rising by an average of 314,000 per month so far this year. In May, average hourly earnings for all employees on private nonfarm payrolls increased by 11 cents, or 0.3%, to $33.44. Over the past 12 months, average hourly earnings have risen 4.3%.
Higher Greenback in the Cards?
A solid jobs report has raised the odds of a rate hike in July. Additionally, inflation remains sticky, which will make it difficult for the Fed to cut rates later this year. This, in turn, should boost the greenback. With small-cap companies being more inclined to the domestic economy and having less foreign exposure, a stronger U.S. dollar is beneficial for the segment.
Against this backdrop, below, we highlight a few small-cap ETFs that gained last week.
ETFs in Focus
Sprott Junior Gold Miners ETF (SGDJ) – Up 8.5%
Vanguard Small Cap Growth ETF (VBK) – Up 1.7%
iShares Morningstar Small-Cap Growth ETF (ISCG) – Up 1.7%
Motley Fool Small-Cap Growth ETF (TMFS) – Up 1.6%
First Trust Multi-Manager Small Cap Opportunities ETF (MMSC) – Up 1.5%
Dimensional US Core Equity Market ETF (DFAU) – Up 1.4%
JPMorgan BetaBuilders U.S. Small Cap Equity ETF (BBSC) – Up 1.1%
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Sprott Junior Gold Miners ETF (SGDJ): ETF Research Reports
Vanguard Small-Cap Growth ETF (VBK): ETF Research Reports
Dimensional US Core Equity Market ETF (DFAU): ETF Research Reports
JPMorgan BetaBuilders U.S. Small Cap Equity ETF (BBSC): ETF Research Reports
iShares Morningstar Small-Cap Growth ETF (ISCG): ETF Research Reports
First Trust Multi-Manager Small Cap Opportunities ETF (MMSC): ETF Research Reports
Motley Fool Small-Cap Growth ETF (TMFS): ETF Research Reports
