Small-cap ETFs sound interesting to bet on: let’s explore
Wall Street has a reason to rejoice amid the gloomy September. The Federal Reserve led market rallies by not hinting at an immediate move to cut back on the bond buying program and by keeping benchmark interest rates unchanged. The Dow Jones Industrial Average rose about 1% on September 22, experiencing its first positive session in five and its best day since July 20. The S&P 500 Index also rose 0.95%, after losing four consecutive days. The general market index also recorded the best performing day since July 23. The Nasdaq Composite also rose 1.02% on the same day.
The index focused on small caps, the Russell 2000, outperformed, gaining 1.48% on September 22. This rise is largely favored by small cap companies which are closely tied to the US economy and are therefore well positioned as the economy improves.
Let’s take a closer look at the factors that keep investors optimistic and create a favorable environment for parking money in small-cap ETFs:
The FDA has approved the emergency use of a booster dose of COVID-19 vaccines from Pfizer Inc. (PFE) and BioNTech SE (BNTX). President Joe Biden also presented a very effective plan to speed up the vaccination rate and control the coronavirus epidemic. It made it mandatory for federal employees to be vaccinated against COVID-19, according to a CNBC article. The Biden government will also issue guidelines to the Department of Labor to impose vaccination warrants on employers with more than 100 employees or perform weekly tests.
The latest retail sales data has pleasantly surprised investors. The metric rose 0.7% sequentially in August 2021 compared to market expectations of a 0.8% decline, according to a CNBC article. Online retail sales rose 5.3% last month after falling 4.6% in July, according to a Reuters report. There was an increase in sales at clothing stores as well as building materials and furniture during the previous month. Encouragingly, core retail sales rebounded 2.5% in August after declining 1.9% in July, according to the Reuters report. The measure highlights the expenditure component of GDP.
U.S. consumer sentiment has also improved slightly despite growing concerns over the surge in coronavirus cases and rising inflation levels. Preliminary consumer sentiment at the University of Michigan rose to 71 in September, from 70.3 last month, according to a BloombergQuint article.
The latest ISM Manufacturing Purchasing Managers’ Index (PMI) data for the United States paints a rosy picture for the industrial sector. The metric rose to 59.9 in August from 59.5 in July and topped the forecast of 58.6, according to a Reuters report. Any reading above 50% indicates an expansion of manufacturing activity in the United States. Notably, the manufacturing sector, which represents 11.9% of the US economy, saw the reading increase for the 15th consecutive month.
In addition, the Fed’s continued support with accommodative monetary policies and support for fiscal stimulus bolster hopes of a rapid recovery from the crisis triggered by the pandemic. Commenting on the Federal Reserve’s move, Peter Boockvar, chief investment officer at Bleakley Advisory Group, said that ‘although a cutback announcement, perhaps, is coming in November, they haven’t done it today’ hui only reflects a committee that is still very accommodating, ”according to a CNBC article.
Red-Hot Small Cap ETFs to Consider
For investors looking to take advantage of this opportunity, the following small cap ETFs could be solid pure plays:
Vanguard Small Cap Growth ETF VBK
This fund tracks the CRSP US Small Cap Growth Index. The product manages assets worth $ 16.21 billion and charges 7 basis points (bps) in annual fees and expenses (read: Fed likely to stay dovish: ETF to buy).
Russell 2000 iShares Growth ETF IWO
This fund tracks the Russell 2000 Growth Index and provides exposure to small cap companies whose earnings growth expectations are above the average rate relative to the market. The product manages assets worth $ 11.82 billion and charges 24 basis points in annual fees and expenses (read: US Dollar to Gain Ahead? ETF to Gain / Lose).
IShares S&P Small-Cap 600 Growth ETF IJT
This product tracks the S&P SmallCap 600 Growth Index. It manages $ 6.15 billion in assets and charges 18 basis points in annual fees and expenses.
SPDR S&P 600 Small Cap Growth ETF SLYG
This ETF tracks the S&P SmallCap 600 Growth Index, which includes the stocks that exhibit the strongest growth characteristics based on sales growth, profit movement versus price, and momentum. The product manages assets worth $ 2.32 billion and charges 15 basis points in annual fees and expenses.
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IShares Russell 2000 Growth ETF (IWO): ETF Research Reports
IShares S&P SmallCap 600 Growth ETF (IJT): ETF Research Reports
ETF Vanguard SmallCap Growth (VBK): ETF Research Reports
ETF SPDR S&P 600 Small Cap Growth (SLYG): ETF Research Reports
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