Small-cap stocks in the Russell 2000 have outperformed the S&P 500, Dow Jones Industrial Average and technology stocks in the NASDAQ Composite over the past three months. While many larger companies have been struggling to cope with a potential trade war, small caps conduct most of their business in the United States and aren’t affected by these risks. At the same time, these companies are well positioned to benefit from the lower corporate tax rate.
The iShares Russell 2000 ETF rose more than 1% to new all-time highs following its breakout from an ascending triangle pattern on Wednesday. According to iShares, the fund’s average P/E ratio clocked in at 20.91x, which is still lower than the S&P 500’s 24.78x P/E ratio. Many investors may be drawn to the lower earnings multiples for these companies compared with the lofty multiples seen at larger companies in the S&P 500 and DJIA. (See also: IWM vs. VTWO: Comparing U.S. Small-Cap ETFs.)
Small-cap stocks have been quietly outperforming the major indexes over the past three months, but traders will be watching these levels. …read more
Read more here: Small Caps in Russell 2000 Break Out to Fresh Highs