Research > ETFs > ETF / ETP Commentary > 

Small Cap Stock ETFs Have Taken the Reins

Small-capitalization stocks and related ETFs have been outperforming their large cap counterparts by the widest margin in over two decades as investors shift out of coronavirus pandemic plays and look to a broad economic recovery.The iShares Russell 2000 ETF (IWM B+), which tracks the widely observed Russell 2000 Index, increased 15.8% so far this year and jumped 42.1% over the past year. Meanwhile, the iShares Core S&P 500 ETF (IVV A), which tracks the benchmark S&P 500 Index, gained 4.8% year-to-date and advanced 23.8% over the past year.Through the end of last Friday, the Russell 2000 index of small companies climbed 15% and set 10 closing records in 2021, well above the S&P 500’s 4% gain, marking the widest such gap between the two indices through Feb. 19 since 2000, the Wall Street Journal reported.“There’s still a lot of ground that small-caps can make up, given that they’ve lagged for most of the previous [economic] expansion,” Max Gokhman, head of asset allocation at Pacific Life Fund Advisors, told the WSJ.Small capitalization stocks have been outperforming in anticipation of greater fiscal spending from the Biden administration, which is pushing for a $1.9 trillion relief package. Additionally, many are growing more optimistic over the broad economic recovery with accelerating vaccination rollouts.“[It] has really been a sentiment shift. It’s basically the market’s expectation that significant fiscal stimulus is coming to the rescue,” Amanda Agati, chief investment strategist at PNC Financial Services Group, told the WSJ, warning that the small cap leadership is reliant on consumer spending and other economic indicators that would have to quickly return to pre-pandemic levels to justify gains.Smaller companies are more sensitive to changes in the domestic economy, compared to their larger peers, which also have a large international footprint. Economically sensitive sectors like energy, materials, and banking also make up a greater portion of the Russell 2000 than larger indexes. Once pummeled cyclical sectors are now attracting bargain hunters betting on a broader recovery.“The stars are really lined up for small-caps as an asset class this year,” Amy Zhang, a small cap fund portfolio manager at Alger, told the WSJ.For more news, information, and strategy, visit the Equity ETF Channel.

Performance data shown is past performance and is no guarantee of future results. Current performance may be higher or lower than the performance data quoted. Yield and return will vary, therefore you have a gain or loss when you sell your shares. For standard quarterly performance, go to the fund's Snapshot page by clicking on the ETF/ETP's symbol.

ETFs may trade at a premium or discount to their NAV and are subject to the market fluctuations of their underlying investments.

For iShares ETFs, Fidelity receives compensation from the ETF sponsor and/or its affiliates in connection with an exclusive long-term marketing program that includes promotion of iShares ETFs and inclusion of iShares funds in certain FBS platforms and investment programs. Please note, this security will not be marginable for 30 days from the settlement date, at which time it will automatically become eligible for margin collateral. Additional information about the sources, amounts, and terms of compensation can be found in the ETF's prospectus and related documents. Fidelity may add or waive commissions on ETFs without prior notice. BlackRock and iShares are registered trademarks of BlackRock, Inc. and its affiliates.

FBS receives compensation from the fund's advisor or its affiliates in connection with a marketing program that includes the promotion of this security and other ETFs to customers ("Marketing Program"). The Marketing Program creates incentives for FBS to encourage the purchase of certain ETFs. Additional information about the sources, amounts, and terms of compensation is in the ETF's prospectus and related documents. Please note that this security will not be marginable for 30 days from the settlement date, at which time it will automatically become eligible for margin collateral.

News, commentary (including "Related Symbols") and events are from third-party sources unaffiliated with Fidelity. Fidelity does not endorse or adopt their content. Fidelity makes no guarantees that information supplied is accurate, complete, or timely, and does not provide any warranties regarding results obtained from their use.

Any data, charts and other information provided on this page are intended to help self-directed investors evaluate exchange traded products (ETPs), including, but limited to exchange traded funds (ETFs) and exchange traded notes (ETNs). Criteria and inputs entered, including the choice to make ETP comparisons, are at the sole discretion of the user and are solely for the convenience of the user. Analyst opinions, ratings and reports are provided by third-parties unaffiliated with Fidelity. All information supplied or obtained from this page is for informational purposes only and should not be considered investment advice or guidance, an offer of or a solicitation of an offer to buy or sell a particular security, or a recommendation or endorsement by Fidelity of any security or investment strategy. Fidelity does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating ETPs. Fidelity makes no guarantees that information supplied is accurate, complete, or timely, and does not provide any warranties regarding results obtained from their use. Determine which securities are right for you based on your investment objectives, risk tolerance, financial situation and other individual factors and re-evaluate them on a periodic basis.

Before investing in any exchange traded product, you should consider its investment objective, risks, charges and expenses. Contact Fidelity for a prospectus, offering circular or, if available, a summary prospectus containing this information. Read it carefully.