Log in
E-mail
Password
Remember
Forgot password ?
Become a member for free
Sign up
Sign up
Settings
Settings
Dynamic quotes 
OFFON

MarketScreener Homepage  >  Equities  >  Nyse  >  IShares Russell 2000 Index (ETF)    IWM

ISHARES RUSSELL 2000 INDEX (ETF) (IWM)
My previous session
Most popular
  Report  
No quotes available
-- USD   0.00%
03/12STOCKS REFLECT : Goldman Sachs
RE
03/07U.S. small-cap stocks find favour as trade-war fears spike
RE
2017LESS THAN 18 PE : BlackRock
RE
SummaryNewsCompany 
News SummaryMost relevantAll newsOfficial PublicationsSector newsTweets
OFFRE

U.S. small-cap stocks find favour as trade-war fears spike

share with twitter share with LinkedIn share with facebook
share via e-mail
0
03/07/2018 | 10:49pm CEST

NEW YORK (Reuters) - Investors are scooping up U.S. small cap stocks as the spectre of steel and aluminium tariffs escalating into a global trade war makes them more edgy about larger companies exposed to international markets.

The resignation of Gary Cohn, a top economic adviser to President Donald Trump who was seen a key voice pushing against protectionism measures, set off the latest bout of market volatility on Wednesday tied to fears of the tariffs.

Since Feb. 28, the day before Trump said he would impose import tariffs of 25 percent on steel and 10 percent on aluminium, the small-cap Russell 2000 <.RUT> has climbed 4.1 percent while the S&P 500 <.SPX>, the benchmark for large-cap stocks, has risen 0.5 percent.

On Wednesday, while the S&P 500 edged lower in a rocky session following Cohn's departure, the Russell gained 0.8 percent.

Small cap stocks are "domestic by nature; they're not selling internationally," said Ryan Detrick, senior market strategist at LPL Financial in Charlotte, North Carolina. "That they're insulated makes them potentially one group that will benefit on a relative basis."

The small-cap trade echoed the months after Trump's November 2016 election, when the Russell soundly beat the S&P 500 as investors bet on policies, such as corporate tax cuts, that would particularly benefit domestically-focused companies.

In 2017 overall, however, the Russell's 13 percent gain lagged the 19.4 percent climb for the S&P 500, and the small-cap barometer had underperformed this year, until Trump's tariff announcement last week.

"Somebody that's buying a U.S. small cap company that makes all its products in the U.S. is probably comfortable," said Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey. "You don't have a global situation there."

The S&P 500 derives about half its profits from outside the United States, according to Mark Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia.

Even so, he said, "there's merits in why you'd want to be diversified across small and large cap."

The Russell's outperformance "could easily dissipate if the bluntness of this trade policy is taken out," Luschini said. "You could get reversion pretty quickly."

While small caps appear to have benefited from the tariff talk, shares of companies that stand to see their costs rise have suffered.

The S&P 1500 machinery index <.SPCOMMAC> has fallen more than 1 percent since last week while the S&P 1500 automobiles and components index <.SPCOMAU> has shed over 2 percent.

By contrast, the S&P 1500 steel index <.SPCOMSTEEL> has climbed 5 percent in the past few days. (For a graphic of how stock indexes have reacted since Trump started talking about tariffs on aluminium and steel, see: http://reut.rs/2FkGUST)

Some investors stayed away from recommending any significant shifts in portfolio strategies based on the tariffs, as uncertainty remained about their extent and timing with a formal announcement still to come.

“We are not spending a lot of time trying to handicap industries or sectors just because we think there are too many moving parts," said David Katz, chief investment officer at Matrix Asset Advisors in New York.

The risk from the tariffs themselves may be limited if there are no repercussions.

"Unless you have a 1950s portfolio of automakers, steelmakers and producers, you will probably not see much impact if you see the tariffs applied as they are being discussed," said Jason Ware, chief investment officer with Albion Financial Group in Salt Lake City, Utah. "However, the big question is where does it go?"

Despite Cohn's exit, some investors may be holding out hope the tariffs will fail to come to pass amid resistance from Republican lawmakers and other countries.

Trump looked set to authorise the tariffs this week as he stepped up pressure against China to develop a plan to reduce its trade imbalance with the United States by a billion dollars. However, stocks pared losses after the White House said late Wednesday that Canada and Mexico, and possibly other countries, may be exempted from the tariffs.

Indeed, an escalation into a trade war could reduce future growth expectations and equity valuations, according to UBS equity strategists, with investors saying the full risks of the tariffs had yet to be priced into the market.

The potential for tariffs also fed into concerns about rising inflation, one of the factors that set off the market's recent 10 percent correction.

Even as stocks bounced back from that slide, they have found renewed volatility after months of relative calm, with the tariff developments and Cohn's departure the latest news to spark swings and lead investors to question whether the decline is over.

The stock market tested major support levels "a few days ago and it was a good test: Half of the gains were wiped out and it bounced from there," said Alan Lancz, president of investment advisory firm Alan B. Lancz & Associates in Toledo, Ohio. "We’re going to experience that again today and tomorrow. We’ll see what happens."

(Additional reporting by Megan Davies; editing by Tom Brown and Jonathan Oatis)

By Lewis Krauskopf, Sinéad Carew and April Joyner

Stocks mentioned in the article
ChangeLast1st jan.
DJ INDUSTRIAL 0.32% 26743.5 Delayed Quote.8.19%
ISHARES RUSSELL 2000 INDEX (ETF) 0.00%-End-of-day quote.0.00%
NASDAQ 100 -0.50% 7531.0719 Delayed Quote.17.74%
NASDAQ COMP. -0.51% 7986.9551 Delayed Quote.16.29%
S&P 500 -0.04% 2929.48 Real-time Quote.9.62%
share with twitter share with LinkedIn share with facebook
share via e-mail
0
Latest news on ISHARES RUSSELL 2000 INDEX
03/12STOCKS REFLECT LITTLE CONCERN OF BRO : Goldman Sachs
RE
03/07U.S. small-cap stocks find favour as trade-war fears spike
RE
2017LESS THAN 18 PERCENT OF GLOBAL STOCK : BlackRock
RE
2017U.S. stock options attractive as earnings reports roll in
RE
2017Low volatility belies fragile U.S. stocks
RE
2016ISHARES RUSSELL 2000 INDEX (ETF) : iShares Russell 2000 Index ETF (NYSE: IWM) Sh..
AC
2015Investor flight from US stocks fails to lift bond market
RE
2015ISHARES RUSSELL 2000 INDEX ETF : Vista Partners Publishes February 2015 Macroeco..
MW
2015ISHARES RUSSELL 2000 INDEX ETF : Vista Partners Publishes January 2015 Macroecon..
MW
2014ISHARES RUSSELL 2000 INDEX ETF : Vista Partners Publishes December 2014 Macroeco..
MW
More news
News from SeekingAlpha
08:16aWe Do Not Know The Effects Of The 'Trade War' 
07:56aTechnically Speaking For The Week Of September 17-21 
06:49aBulls Charge To All-Time Highs 
05:56aGreenback's Downside Correction Is Over, Or Nearly So 
05:33aWhile Diamonds And Spiders Set New Highs, The Nasdaq 100 And Russell 2000 ETF.. 
Sector and Competitors
1st jan.Capitalization (M$)
ISHARES RUSSELL 2000 INDEX (ETF)0.00%0
COMPASS DIVERSIFIED HOLDINGS7.08%1 087
DRAPER ESPRIT57.09%731
INDIA GRID TRUST--.--%362
SARATOGA INVESTMENT CORP4.56%174
CM FINANCE INC8.59%123