syahrir maulana
The Vanguard US Small Cap ETF (NYSEARCA:VB) has performed well since the start of the year due to the strong recovery seen in small cap growth stocks. The VB looks to have broken out to the upside, and
VB: Small Caps Breaking Out Is A Trade Not An Investment
Summary
- The Vanguard US Small Cap ETF is breaking out to the upside led by the recovery in growth stocks, which have shown signs of life following weakness in 2022.
- While the near-term technical picture for the VB suggests some further near-term upside, the ETF is unlikely to generate strong long-term returns.
- Future returns are likely to be lower than seen in the past even if profit margins remain at all-time highs as real sales growth slows in line with real GDP.
- A gradual mean reversion lower in profit margins would likely see real returns come in little higher than zero over the next decade, underperforming Treasuries with much higher volatility.
I am a full-time investor and owner of Icon Economics - a macro research company focussed on providing contrarian investment ideas across FX, Equities, and Fixed Income based on Austrian economic theory. Formerly Head of Financial Markets at Fitch Solutions, I have 15 years of experience investing and analysing Asian and Global markets.
Analyst’s Disclosure:I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.