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Small Caps Outperform In June: 4 Best ETFs & Stocks

After lagging in the first five months of 2017, small cap stocks have regained their sheen and outperformed the broader U.S. market in June. This is especially true as the ultra-popular small-cap ETF (IWM - Free Report) is up 3.5% this month compared with a gain of 1.1% for the mid-cap counterpart (IJH - Free Report) and flat return for the large-cap cousin (SPY - Free Report) .

Disclosure: contains statements and statistics that have been obtained from sources believed to be reliable but are not guaranteed as to accuracy or completeness. References to any specific ...


The outperformance has come on the back of a sell-off in the technology sector and re-emergence of geopolitics. The technology sector, which is the main driver of the stock rally this year, has seen a tumultuous ride on overvaluation concerns. In fact, the tech heavy Nasdaq closed below its 50-day moving average on June 29 for the first time since April 13, breaking below a key technical support level.

Political instability in Europe, chances of an end to the cheap monetary policy era across the globe and tension in the Gulf States have added to investors’ woes.

On the other hand, growth in the U.S. economy is on a solid path buoyed by an impressive labor market, increase in wages, rise in inflation and increasing consumer spending. Notably, the first-quarter final GDP growth was revised upward to 1.4% from the second estimate of 1.2% and the initial estimate of 0.7%. It reflects stronger exports and increased consumer spending. Additionally, consumer confidence is on the rise with Conference Board Consumer Confidence Index climbing to 118.9 in June from 117.9 in May.

Against such a backdrop, small cap stocks are the biggest beneficiaries as these are closely tied to the U.S. economy and do not have much...