5 Small-Cap ETFs Set To Explode On COVID-19 Vaccines

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In the recently skyrocketing stock market, small caps have been at the forefront of the rally. This is especially true, as the availability of vaccines will lead to the end of the pandemic and swift economic recovery. As small-cap companies are closely tied to the U.S. economy, these outperform on improving American economic health.

Coronavirus immunization has started in America with more vaccines on the way. Pfizer’s (PFE - Free Report) first shots, developed in collaboration with the German biotechnology company BioNTech (BNTX - Free Report) is being inoculated to health workers and nursing home residents. The FDA authorized the emergency use in people aged 16 and older early this month. Another company — Moderna (MRNA - Free Report) — has also received FDA authorization for emergency use against COVID-19 in individuals 18 years of age or older.

Additionally, the super-easy monetary policy has been driving the small-cap rally. Fed Chairman Jerome Powell pledged to hold rates near zero and will continue the asset purchase program at the current rate until “substantial further progress” has been made toward reaching maximum employment and healthy inflation. A low-interest rate bodes well for small-cap stocks as it pushes up economic activities and results in higher spending, thus boosting domestically focused companies.

Increased optimism on further fiscal stimulus added to the strength. Democratic and Republican leaders reached an agreement on the new coronavirus relief package of $900 billion, which includes a round of $600 direct payments, funding for the Paycheck Protection Program, and a $300 per week unemployment compensation supplement. The bill will soon be voted on in the House and the Senate.

The rollout of coronavirus vaccine will help the world's economy bounce back in 2021, compelling the agencies to lift the growth outlook. The Organization for Economic Co-operation and Development has raised global GDP forecast to 5.2% from 4.9% for the next year after an estimated 4% decline in 2020. Fitch has lifted the 2021 global growth forecast to 5.3% from 5.2% with stronger growth in the second half. The Federal Reserve revised its GDP growth forecast to 4.2% from 4%.

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