Small-Cap ETFs For The Next Rally

Small-Cap ETFs For The Next Rally

A Seeking Alpha Contribution


  • Small-cap stocks are at their lowest relative price to the S&P 500 Index since 2008-2009.
  • IWM has 24 percent of assets in financials.
  • IWO counts healthcare and technology as its largest sectors.
  • EWRS has significant energy exposure.

The Russell 2000 Index has been in a large sideways trading pattern since March and a smaller one since the end of October. Since peaking on March 4, the iShares Russell 2000 ETF (NYSEARCA:IWM) is down 2.12 percent including dividends. The S&P 500 Index is up 11.68 percent over the same period, a gap of 13.8 percent. This is the largest under performance by the small-cap index since 2008. Since the preponderance of evidence points to a continued bull market in stocks, odds favor the small caps closing this gap in 2015.

Below is a price ratio chart of IWM and SPY. A rising line shows IWM outperforming the SPY. The current under performance by IWM is worse than the 2011 drop and in terms of relative prices, IWM is at its cheapest since the 2008-2009 financial crisis…. To Continue Reading Please, Click Here.

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