4 Small-Cap ETFs & Stocks To Explode Higher

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With renewed optimism over a sustained economic recovery and robust corporate earnings growth, the small-cap space is set to explode higher. In fact, the Russell 2000 Index outperformed the broad market index over the past month, gaining 3.7% versus 2.9% for the S&P 500 Index.

The FDA has granted the first full U.S. approval to a COVID-19 vaccine made by Pfizer (PFE - Free Report) and BioNTech that will help quash the ongoing surge in the Delta variant and lead to the continued reopening of the economy. Additionally, the U.S. economy returned to the pre-pandemic level with the GDP rising 6.6% annually in the second quarter, indicating a sustained recovery from the pandemic recession.

Rapid vaccinations, reopening of businesses and trillions of dollars of government stimulus spending continued to power consumer spending and resulted in robust growth. The International Monetary Fund recently raised its 2021 growth forecast from 4.6% to 7.0%, which marks the fastest U.S. growth pace since 1984.

Meanwhile, the Q2 earnings picture is very strong, with broad-based strength across all major sectors and the overall quarterly total on track to reach a new all-time record. Additionally, a dovish Fed added to the strength. Though the central bank will gradually begin tapering $120 billion in monthly bond purchases by the end of the year, it is in no hurry to raise interest rates. Lower rates will continue to fuel the economy, pushing up consumer spending.

As small-cap companies are more domestically tied, these are poised to outperform when the economy improves. These pint-sized stocks generate most of their revenues from the domestic market, making them great choices during an uptrend.

As such, we have presented four ETFs & stocks from the space that looks to outperform given that they have superior fundamentals. These funds have a Zacks Rank #1 (Strong Buy) or 2 (Buy) and are among the popular choices. For stocks, we have chosen the extra advantage of a Growth Score of B or better and double-digit earnings growth for the fiscal year.

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Disclosure: Zacks.com contains statements and statistics that have been obtained from sources believed to be reliable but are not guaranteed as to accuracy or completeness. References to any ...

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