US Small-Cap Stocks Continue To Rally

Small-cap stocks delivered an early Christmas gift: US shares in the small-cap realm posted the strongest gain during the shortened Christmas trading week. At the Dec. 24 close, iShares Core S&P Small-Cap (IJR) was up 1.3% for the trading week – well ahead of the rest of the field for our list of proxy ETFs representing the major asset classes on a global basis.

IJR’s 1.3% gain marks the seventh straight weekly advance. The rise lifted the fund to a record close. Year to date, IJR is up 11.5% on a total return basis, which is fourth in line for the best 2020 performance for the asset classes in the table above.

Overall, last week delivered mixed results for major asset classes, with gains and losses evenly divided for our global opportunity set. The deepest setback during Christmas week was posted by VanEck Vectors Africa (AFK), which slumped 1.7%.

The pullback isn’t all that surprising in the wake of the fund’s strong rally of late. AFK in recent weeks has been a leading performer, and at times leading the rally in risk assets, and so a round of profit-taking was arguably overdue after an extended run.

With one final, shortened trading week to go for 2020, the bias for gains in most asset classes stands out as a leading theme for the year. With the exception of US and foreign property shares (VNQ and VNQI, respectively), along with Latin America stocks (ILF), gains dominate for the year-to-date column.

Given this backdrop, it's no wonder that current drawdowns tend to be zero or within shouting distance of nothing. Barring a sudden fall from grace in the final run for 2020, the year is set to fade into the history books with a strong upside bias in most corners of risk assets.

The year’s strongest year-to-date gain (still) is a broad measure of US stocks. Vanguard US Total Stock Market (VTI) is up nearly 20% in 2020 through Dec. 24, the bleeding edge for rallies this year, based on our breakout of asset classes via the G.B16 table above.

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