Small Cap ETFs Lead the Way in Recovery Periods
Small-cap ETFs are leading the charge as the markets begin to show tentative signs of recovery.
The downtrend in July was bucked by the iShares Russell 2000 Index (IWM) with a 3.3% gain, reports Trang Ho for Investor’s Business Daily. It handily outpaced the SPDRs (SPY), which lost 0.9%. Year-to-date, the Russell is down 6%, while the S&P is off by 13%.
Performing even better was the iShares Russell Microcap Index (IWC), which gained 4.6%.
If we continue to trend toward economic recovery, small-caps should perform best. That’s because their small size makes them more nimble and quicker to act when the conditions are favorable. The opposite is true, as well: when the going gets rough, riskier investments tend to be the first to go as investors seek refuge in blue chips.
Other small caps include:
- SPA Market Grader Small-Cap 100 (SSK), down 10.3% year-to-date
- First Trust Small Cap Core AlphaDEX (FYX), down 6.4% year-to-date
- PowerShares Dynamic Small Cap (PJM), down 3.9% year-to-date
- RevenueShares Small Cap (RWJ), up 2.7% since March 17 inception
Foreign Currency ETFs Strong in July
Last month, the U.S. dollar staged a rally, but foreign currency exchange traded funds still pulled through with some decent performance.
Although the dollar rose up against the British pound and yen, it fell against the rand by 5.4%.
Also ahead of the dollar were the BRIC currencies, particularly the WisdomTree Dreyfus Brazilian Real (BZF). The fund was up 3.3% for the month.
The dollar has fallen against the Mexican peso by 8.2% since the start of the year. CurrencyShares Mexican Peso Trust (FXM), up 13% year-to-date, reflects this.
Among the funds that have one-year records, the numbers are impressive:
- CurrencyShares Euro Trust (FXE) is up 18% in the last year
- CurrencyShares Australian Dollar Trust (FXA) is up 17.1% in the last year, although it has taken a hit in the last month by falling 1.3%
Some of the top-performing funds belong to currencies in emerging markets. Why? High interest rates.