Small caps just had their first record week in three years, and one exchange-traded fund expert predicts the group’s all-time highs will help investors return to the group.
“Small caps will be more favorable in 2025,” VettaFi’s Todd Rosenbluth told CNBC. “Edge ETF” this week “They started going up since the election and have been heading into the election as interest rates have been coming down.”
Rosenbluth, the firm’s head of research, expects ETFs specializing in small caps to take advantage of investors looking to broaden their exposure to the market.
The Russell 2000which tracks small-cap stocks, hit its first record high since November 2021 this week and just saw its best monthly performance since last December. The index is up nearly 11% in November and 35% over the past 52 weeks through Friday’s close.
Rosenbluth suggests profit taking in the “Magnificent Seven“stocks, which include Apple, Microsoft, alphabet, Amazon, Nvidia, Metaplatforms i Teslawill benefit small caps. He also expects investors to exit money market accounts due to the effects of the Federal Reserve’s easing interest rate policy.
“We expect a little more dispersion in the winners,” Rosenbluth said.
Rosenbluth quoted iShares Core S&P Small-Cap ETF and the VictoryShares Small Cap Free Cash Flow ETF as possible ways to play hard in small caps. The Core S&P Small-Cap ETF is up 11% in November, while the VictoryShares fund is up nearly 8%.
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