VB - What To Buy After You Sell The Russell 2000
2024-04-03 03:07:52 ET
Summary
- Despite the case for small caps, it is recommended to sell the Russell 2000 and related ETFs due to negative alpha and seasonal factors.
- The S&P 600 and the CRSP Small Cap Index do not suffer from the same issues as the Russell 2000, and they have performed better than it.
- IJR, VB, and AVUV are all good alternatives to IWM, VTWO, and VRTIX.
There is a strong case to be made for having a position in small cap stocks at this time. Reasons include:
- Anticipated Fed easing may lift small caps more than large caps
- Mean reversion - small caps have underperformed large caps by historic amounts over the past five years
- A potential slow down or reversal of the rally in tech which has disproportionally benefitted large cap indices such as the S&P 500.