Can Small Caps Continue Their Recent Surge?

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December 7, 2016 11:33am NYSE:IWM


From Zacks: For investors seeking momentum, iShares Russell 2000 ETF (IWMFree Report) is probably on radar now. The fund just hit a 52-week high, which is up roughly 43.7% from its 52-week low price of $93.64/share.

But are more gains in store for this ETF? Let’s take a quick look at the fund and the near-term outlook on it to get a better idea on where it might be headed:

IWM in Focus

The product focuses on the small segment of the U.S. market, holding a large basket of 1,966 stocks with none holding more than 0.36% of the assets. About one-fifth of the portfolio is allotted to financials while information technology, industrials, consumer discretionary and health care round off to the next four. The fund charges investors 20 basis points a year in fees (see: all small-cap ETFs here).

Why the Move?

The U.S. stock market has gained strength with U.S. president-elect Donald Trump planning expansive government spending, lesser financial regulation and increased tax cuts to boost economic growth. Trump’s massive stimulus policies should benefit small caps more as these are closely tied to the U.S. economy and generate most of their revenues from the domestic market. Also, the renewed momentum in the U.S. economy led to a strong air of optimism in the small-cap space.

More Gains Ahead?

Currently, IWM has a Zacks ETF Rank of 3 or ‘Hold’ rating with a Medium risk outlook, so it is hard to get a handle on its future returns one way or the other. However, the fund has a positive weighted alpha of 25.70. A positive weighted alpha hints at more gains.

This article is brought to you courtesy of Zacks Research.

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