In the Face of Adversity, Small-Caps Stand Strong

As coronavirus case counts trend higher yet again, and with Election Day jitters mounting, stocks are faltering. However, small-caps are showing surprising resilience, a trend that bodes for ETFs like the ERShares International Equity ETF (NYSEARCA: ERSX).

ERSX tracks 50 non-U.S. companies from around the world with market capitalizations between $300 million and $5 billion USD and the highest rank based on the six investment style factors.

“EntrepreneurShares has created a rules-based methodology that selects publicly-traded Entrepreneurial companies,” according to the issuer. “This procedure is applied in creating the Entrepreneur Non-US Small Cap Index. The Index is comprised of 50 Non-US companies form around the world with market capitalization based between $300 million and $5 billion USD.”

ERSX strength is on display this week.

ERSX YTD Performance

“In Monday’s blustery sell-off, the Dow and S&P 500 fell below an important trend indicator - but not the small cap Russell 2000,” reports Patti Domm for CNBC. “That gives more heft to the belief of some technical strategists that small caps are signaling a broadening of market participation that should help take the entire stock market higher.”

ERSX Struts Its Stuff

Small-cap equities have been benefitting from the coronavirus sell-offs back in March, but investors can’t be too optimistic over the recent momentum. The question is whether it’s sustainable.

“The point is no damage was done on this pullback, and we think the recovery story is in play. We’re expecting a broad market breakout. We expect participation to continue to broaden. Our broader theme is cyclical and beta and small caps have that,” said Ari Wald, technical analyst at Oppenheimer.

With November right around the corner, so arrives the best six-month period in which to own stocks, a time frame that has historically favored small-cap equities. Investors looking to engage with smaller stocks with less risk and higher income opportunities can consider ERSX.

With volatility taking hold of major U.S. indexes once again, it might seem that seeking the safety of large cap equities is the best move when markets flux up and down to a large degree, but over the next 10 years, it could be the small-cap elite to assume the mantle.

Analysts are looking specifically at value opportunities that the small-cap equities bring in the long-term schema over the next decade. ERSX could be a winning bet over the next several months.

For more on entrepreneurial strategies, visit our Entrepreneur ETF Channel.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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