5 Small-Cap ETFs & Stocks Beating Russell 2000

After a tough 2018, the Wall Street bulls came back roaring this year. While the gains were broad-based gains, the small-cap stocks are outperforming. This is especially true as the Russell 2000 Index has risen 17.1% so far this year compared with a gain of 10.7% for the S&P 500 and 15.4% for the S&P MidCap 400 Index.

The outperformance was mainly driven by global issues like Brexit, trade war, global slowdown, slowing growth in Europe, Japan and China as well as geopolitical risk. This is because these stocks are closely tied to the U.S. economy and do not have much exposure to the international market. Notably, these pint-sized stocks are considered safer and better plays if political issues or economic turmoil creep into the picture, though these are highly volatile and could lead to huge losses in an erratic market.

Additionally, an encouraging domestic economic trend backs their momentum as these stocks generally outperform on improving U.S. economic health. Rising wages, subdued inflation, higher consumer confidence and increasing consumer spending bode well for the U.S. economy. All these combinations will support the bull market to complete its decade long run on Mar 9 this year. Further, the Fed comment that it is not in a hurry to raise rates this year also led to the outperformance of the pint-sized stocks.

Given this, there have been winners in several corners of the small-cap space. Below we have presented five ETFs & stocks that have easily crushed the Russell 2000 index this year and are likely to continue their strong performance.

Best ETFs

All these funds have a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold), suggesting room for more upside.

Invesco S&P SmallCap Materials ETF (PSCM - Free Report) – Down 12.6%

This fund targets the material sector offering exposure to companies that are principally engaged in the business of producing raw materials, including paper or wood products, chemicals, construction materials, and mining and metals. It follows the S&P SmallCap 600 Capped Materials Index.

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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 specific ...

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