Playing Catch-Up in U.S. Small Caps as Inflows Hit Six-Year High
Callie Bost and Annelise Alexander Write:
With the S&P 500 stalled out, investors are adopting an old line from Steve Martin: Let?s get small.
They?re rushing into smaller stocks, putting their money into an exchange-traded fund tracking the group at the fastest rate in more than six years. The Russell 2000 Index is poised for its best half year since 2010 versus the Standard & Poor?s 500 Index, according to data compiled by Bloomberg.
?After two to three years of underperformance and a deflation scare last year, institutional and retail portfolios alike have gotten too underweight small caps,? said Jim Paulsen, the Minneapolis-based chief investment strategist at Wells Capital Management Inc. His firm oversees $351 billion. ?They started to outperform and people now have to play catch-up.?
The Russell 2000 has jumped 4.3 percent since the end of April, hitting an all-time high last week. The S&P 500, by contrast, has been stuck, climbing 0.1 percent in that same period as momentum has slowed to a two-decade low. Both the small-cap index and the S&P 500 declined 0.6 percent at 9:47 a.m. in New York.
Traders searching for action have added $3.7 billion dollars to the iShares Russell 2000 ETF this month, positioning it for the biggest month of inflows since September 2008, according to Bloomberg data. Hedge funds now own more long than short bets in Russell 2000 futures for the first time in 15 months, data from the U.S. Commodity Futures Trading Commission through June 23 show.