For more than a year now, there’s been ample discussion about whether or not the U.S. economy is in or approaching a recession. The surprisingly strong May jobs report out last Friday appears to have allayed some of those concerns. Should recession fears continue easing and economic data prove cooperative with more bullish signs, those scenarios could pave the way for a resurgence in small-cap stocks. This could benefit exchange-traded funds such as the Invesco NASDAQ Future Gen 200 ETF (QQQS).
According to readings on some small-cap gauges, the group is currently in a bear market, flailing while large-cap growth stocks lead the broader market higher. That’s a rare scenario that could portend an upside for funds such as QQQS in the back half of the year.
“Small caps are down about 21% from their peak in November 2021 as measured by the Morningstar US Small Cap Index. The group has turned in a relatively flat performance in the five years since its prior peak in August 2018, producing total annualized returns of 2.6%. In contrast, the Morningstar US Market Index has produced annualized total returns of 9.5% in that time frame,” according to Morningstar research.
Why QQQS Is Relevant Today
It’s possible that QQQS proves not only pertinent in the near-term small-cap ETF conversation, but the fund could also take on a leadership role should smaller stocks rebound. It has a couple of traits that could make that leadership possible.
