Rate cuts are coming, it seems, with the U.S. economy slowing down precipitously in July. Market watchers are increasingly seeing a potential 50 basis point (bps) cut in September with potentially even more cuts after that. Markets have eagerly anticipated cuts basically ever since the Fed’s rapid rate hikes to combat pandemic-related inflation. Given that change in outlook, certain ETF segments like small-cap growth ETFs could be set to benefit.
See more: Prepare for Fed Rate Cuts With Active Bond ETFs
Given that potential rate cut outlook, which ETFs in the small-cap growth space are standing out? Long-term performance stands out as a potent metric with which to assess what is a popular category of funds. These three ETFs could appeal based on that attribute.
3 Long-Term Performing Small Cap Growth ETFs
The Invesco Dorsey Wright SmallCap Momentum ETF (DWAS ) launched more than ten years ago and sits at just under $1 billion in AUM. The fund has returned 10.7% over the last five years per Invesco data. That outperforms both its benchmark, the Russell 2000 Total Return Index, and both its ETF Database Category and Factset Segment averages.
Charging 60 bps, DWAS looks to identify small-cap firms with strong price momentum based on, among other things, a security’s relative strength score. It tracks the Dorsey Wright SmallCap Technical Leaders Index.
The Vanguard Russell 2000 Growth ETF (VTWG ) also launched more than a decade ago, approaching 15 years of operation. Charging 15 bps, the strategy has returned 7.69% over five years. That also outperforms its ETF Database Category and Factset Segment averages. VTWG tracks the Russell 2000 Growth Index, looking for the most growth-aligned small caps available. The strategy also stands out among small-cap growth ETFs with more than $1 billion in AUM.
Finally, the smaller but intriguing Motley Fool Small-Cap Growth ETF (TMFS ) could appeal. For an 85 bps fee, TMFS actively invests in small-cap growth stocks. Its returns of 8.6% over the last five years also outdid its own benchmark, the Russell 200 Growth Total Return index. It too outperformed its ETF Database Category and Factset Segment averages over five years.
Small-cap growth ETFs present some intriguing upside right now especially if rate cuts do arrive. For those investors looking at their options therein, strategies like these could appeal.
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