We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Small-cap stocks have been in the limelight amid the market rotation triggered by growing expectations of Fed rate cuts in September. The Russell 2000 Index has gained 10.4% so far this month against the S&P 500’s 0.03% decline.
Many ETFs in the space are hitting new 52-week highs. Some of them from different segments or corners are Invesco KBW Regional Banking ETF (KBWR - Free Report) , Invesco S&P SmallCap Materials ETF (PSCM - Free Report) , Invesco S&P SmallCap Health Care ETF (PSCH - Free Report) , WisdomTree U.S. SmallCap Fund (EES - Free Report) and SPDR S&P 600 Small Cap Value ETF (SLYV - Free Report) .
Small-cap stocks generally lead the way higher on improving American economic health as these are closely tied to the U.S. economy and generate most of their revenues from the domestic market. The world's biggest economy’s growth has been resilient amid 23-year high interest rates and accelerated in the second quarter, primarily driven by solid consumer spending and higher business investment.
GDP picked up 2.8% annually, higher than the 2% growth expected by economists surveyed by Bloomberg and 1.4% in the first quarter. A resilient economy, coupled with falling inflation, has raised hopes that the central bank could tame prices without triggering a recession. While the Fed has penciled in just one rate cut for this year, traders are betting on up to three, according to the CME FedWatch Tool (read: Small-Cap ETFs to Rally on Upbeat U.S. Q2 GDP Growth Data?).
The pint-sized companies have a higher level of debt, and lower rates lead to reduced borrowing costs. This helps small businesses to expand their operations easily and results in increased profitability. This, in turn, stimulates economic growth.
Further, the artificial intelligence (AI) craze holds the promise of ushering in fresh growth opportunities in every corner of the sector. While mega-cap companies are leading the AI world, many small-cap stocks having huge potential in this field remain untapped. According to a new report by Grand View Research, the global artificial intelligence market is expected to witness a CAGR (2024-2030) of 36.6% to reach $811.75 billion by 2030 (read: 5 ETF Predictions for the Second Half of 2024).
In terms of sector, low rates can positively impact real estate, consumer discretionary and financial services, which are typically sensitive to interest rate changes. In real estate, lower rates can boost housing market activity by making mortgages more affordable. For consumer discretionary sectors, reduced borrowing costs can lead to increased consumer spending. In the financial sector, while lower rates can compress net interest margins for banks, they can encourage lending and potentially lead to increased consumer and business loan activity.
Furthermore, small-cap stocks are considered safer and better plays if political issues or economic turmoil creep into the picture. Escalating tensions in the Middle East and the ongoing Russia-Ukraine war are driving the appeal for small-cap stocks.
Invesco KBW Regional Banking ETF offers exposure to publicly traded U.S. regional banking and thrift companies by tracking the KBW Nasdaq Regional Banking Index. It holds 51 stocks in its basket, with none accounting for more than 4% of assets (read: Regional Banking ETF Hits New 52-Week High).
Invesco KBW Regional Banking ETF is a relatively less popular and less liquid option in the space, with AUM of $57 million and an average daily volume of 5,000 shares. It charges 35 bps in fees per year from investors and has a Zacks ETF Rank #4 (Sell) with a High risk outlook.
Invesco S&P SmallCap Materials ETF offers exposure to companies that are principally engaged in 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, holding 33 securities in its basket.
Invesco S&P SmallCap Materials ETF has an AUM of $17.6 million and trades in a volume of 2,000 shares a day on average. It charges 29 bps in annual fees and has a Zacks ETF Rank #3 (Hold) with a High risk outlook.
Invesco S&P SmallCap Health Care ETF (PSCH - Free Report) – 52-Week High: $47.01
Invesco S&P SmallCap Health Care ETF targets the small-cap healthcare space and is home to 69 securities. Healthcare providers & services and healthcare equipment & supplies take the largest share at 29.9% and 28.7%, respectively, while biotechnology and pharmaceuticals round off the next two with double-digit exposure each.
Invesco S&P SmallCap Health Care ETF has amassed $203.6 million in its asset base and trades in a good average daily volume of around 16,000 shares. It charges 29 basis points a year from investors and has a Zacks ETF Rank #3 (Hold) with a High risk outlook.
WisdomTree U.S. SmallCap Fund (EES - Free Report) – 52-Week High: $53.24
WisdomTree U.S. SmallCap Fund targets earnings-generating small-cap companies by tracking the WisdomTree U.S. SmallCap Index. Holding 891 stocks in its basket, financials takes the largest share at 27.9% of the assets while industrials, consumer discretionary and information technology round off the next spots.
WisdomTree U.S. SmallCap Fund has amassed $643.1 million in its asset base and sees a moderate volume of around 32,000 shares per day. It charges 38 bps in annual fees and has a Zacks ETF Rank #3 with a Medium risk outlook.
SPDR S&P 600 Small Cap Value ETF (SLYV - Free Report) – 52-Week High: $87.38
SPDR S&P 600 Small Cap Value ETF targets the stocks that exhibit the strongest value characteristics based on book value-to-price ratio, earnings-to-price ratio and sales-to-price ratio. It tracks the S&P SmallCap 600 Value Index and holds 463 stocks in its basket. SLYV is widely spread across sectors, with financials, industrials and consumer discretionary making up for a double-digit exposure each (read: Here's Why You Should Bet on Beaten-Down Small-Cap ETFs).
SPDR S&P 600 Small Cap Value ETF has AUM of $4 billion while trading in a lower volume of 179,000 shares a day on average. It charges 15 bps in annual fees.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
5 Small-Cap ETFs Scaling New Highs
Small-cap stocks have been in the limelight amid the market rotation triggered by growing expectations of Fed rate cuts in September. The Russell 2000 Index has gained 10.4% so far this month against the S&P 500’s 0.03% decline.
Many ETFs in the space are hitting new 52-week highs. Some of them from different segments or corners are Invesco KBW Regional Banking ETF (KBWR - Free Report) , Invesco S&P SmallCap Materials ETF (PSCM - Free Report) , Invesco S&P SmallCap Health Care ETF (PSCH - Free Report) , WisdomTree U.S. SmallCap Fund (EES - Free Report) and SPDR S&P 600 Small Cap Value ETF (SLYV - Free Report) .
Small-cap stocks generally lead the way higher on improving American economic health as these are closely tied to the U.S. economy and generate most of their revenues from the domestic market. The world's biggest economy’s growth has been resilient amid 23-year high interest rates and accelerated in the second quarter, primarily driven by solid consumer spending and higher business investment.
GDP picked up 2.8% annually, higher than the 2% growth expected by economists surveyed by Bloomberg and 1.4% in the first quarter. A resilient economy, coupled with falling inflation, has raised hopes that the central bank could tame prices without triggering a recession. While the Fed has penciled in just one rate cut for this year, traders are betting on up to three, according to the CME FedWatch Tool (read: Small-Cap ETFs to Rally on Upbeat U.S. Q2 GDP Growth Data?).
The pint-sized companies have a higher level of debt, and lower rates lead to reduced borrowing costs. This helps small businesses to expand their operations easily and results in increased profitability. This, in turn, stimulates economic growth.
Further, the artificial intelligence (AI) craze holds the promise of ushering in fresh growth opportunities in every corner of the sector. While mega-cap companies are leading the AI world, many small-cap stocks having huge potential in this field remain untapped. According to a new report by Grand View Research, the global artificial intelligence market is expected to witness a CAGR (2024-2030) of 36.6% to reach $811.75 billion by 2030 (read: 5 ETF Predictions for the Second Half of 2024).
In terms of sector, low rates can positively impact real estate, consumer discretionary and financial services, which are typically sensitive to interest rate changes. In real estate, lower rates can boost housing market activity by making mortgages more affordable. For consumer discretionary sectors, reduced borrowing costs can lead to increased consumer spending. In the financial sector, while lower rates can compress net interest margins for banks, they can encourage lending and potentially lead to increased consumer and business loan activity.
Furthermore, small-cap stocks are considered safer and better plays if political issues or economic turmoil creep into the picture. Escalating tensions in the Middle East and the ongoing Russia-Ukraine war are driving the appeal for small-cap stocks.
ETFs at New Highs
Invesco KBW Regional Banking ETF (KBWR - Free Report) – 52-Week High: $59.66
Invesco KBW Regional Banking ETF offers exposure to publicly traded U.S. regional banking and thrift companies by tracking the KBW Nasdaq Regional Banking Index. It holds 51 stocks in its basket, with none accounting for more than 4% of assets (read: Regional Banking ETF Hits New 52-Week High).
Invesco KBW Regional Banking ETF is a relatively less popular and less liquid option in the space, with AUM of $57 million and an average daily volume of 5,000 shares. It charges 35 bps in fees per year from investors and has a Zacks ETF Rank #4 (Sell) with a High risk outlook.
Invesco S&P SmallCap Materials ETF (PSCM - Free Report) – 52-Week High: $82.56
Invesco S&P SmallCap Materials ETF offers exposure to companies that are principally engaged in 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, holding 33 securities in its basket.
Invesco S&P SmallCap Materials ETF has an AUM of $17.6 million and trades in a volume of 2,000 shares a day on average. It charges 29 bps in annual fees and has a Zacks ETF Rank #3 (Hold) with a High risk outlook.
Invesco S&P SmallCap Health Care ETF (PSCH - Free Report) – 52-Week High: $47.01
Invesco S&P SmallCap Health Care ETF targets the small-cap healthcare space and is home to 69 securities. Healthcare providers & services and healthcare equipment & supplies take the largest share at 29.9% and 28.7%, respectively, while biotechnology and pharmaceuticals round off the next two with double-digit exposure each.
Invesco S&P SmallCap Health Care ETF has amassed $203.6 million in its asset base and trades in a good average daily volume of around 16,000 shares. It charges 29 basis points a year from investors and has a Zacks ETF Rank #3 (Hold) with a High risk outlook.
WisdomTree U.S. SmallCap Fund (EES - Free Report) – 52-Week High: $53.24
WisdomTree U.S. SmallCap Fund targets earnings-generating small-cap companies by tracking the WisdomTree U.S. SmallCap Index. Holding 891 stocks in its basket, financials takes the largest share at 27.9% of the assets while industrials, consumer discretionary and information technology round off the next spots.
WisdomTree U.S. SmallCap Fund has amassed $643.1 million in its asset base and sees a moderate volume of around 32,000 shares per day. It charges 38 bps in annual fees and has a Zacks ETF Rank #3 with a Medium risk outlook.
SPDR S&P 600 Small Cap Value ETF (SLYV - Free Report) – 52-Week High: $87.38
SPDR S&P 600 Small Cap Value ETF targets the stocks that exhibit the strongest value characteristics based on book value-to-price ratio, earnings-to-price ratio and sales-to-price ratio. It tracks the S&P SmallCap 600 Value Index and holds 463 stocks in its basket. SLYV is widely spread across sectors, with financials, industrials and consumer discretionary making up for a double-digit exposure each (read: Here's Why You Should Bet on Beaten-Down Small-Cap ETFs).
SPDR S&P 600 Small Cap Value ETF has AUM of $4 billion while trading in a lower volume of 179,000 shares a day on average. It charges 15 bps in annual fees.