Exchange traded funds that invest in small-cap stocks have fallen through their 50-day moving average in this week’s selling, breaching a key technical level. However, they rallied back from a similar setback in March.
The $16 billion iShares Russell 2000 (IWM), an ETF tracking a popular index of U.S. small caps, traded lower Tuesday.
Small-cap stocks have led the way during the rally from the March 2009 bottom. In fact, U.S. small-cap stocks “have outperformed over the past 10 years, providing an annualized return of 9.2%, easily outpacing the large-cap equity returns of 2.7%,” Morningstar said in a recent profile of iShares Russell 2000.
However, the outperformance of small-cap ETFs over the past decade is “unsustainable” and they now look expensive relative to large-cap benchmarks such as the S&P 500, the investment researcher said.
iShares Russell 2000 (IWM)
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