U.S. Small Business Confidence Up In July: ETFs In Focus

Per a National Federation of Independent Business report released August 9, 2017, small business activity improved in July. The index increased to 105.2 in July compared with 103.6 in June and was above market forecast of 103.5.

The optimism is primarily being attributed to strong economic sentiment, supported by higher consumer confidence.

A resilient labor market also contributed to the optimism. Data released by the Bureau of Labor Statistics showed non-farm payrolls addition of 209,000 in July, surpassing market estimates of 180,000 (read: ETFs to Buy or Dump Post Upbeat July Jobs Data).

Moreover, the unemployment rate declined to 4.3% compared with 4.4% in the previous month. Also, a measure of labor demand, as calculated by U.S. job openings, jumped to a record 17-year high in June, as it increased by 461,000 to a seasonally adjusted figure of 6.2 million.

The economy also seems to be in good shape. GDP in Q2 grew 2.6% owing to a boost from trade. Strong consumer confidence is also representative of optimism in the economy, as it hit a 16-year high of 121.1 in July compared with 118.9 in June.

However, the U.S. economy faces high geopolitical risks owing to rising tensions with North Korea. Moreover Trump’s failure to pass the Healthcare bill has sparked concerns amongst investors about his ability to pass the tax reform.

Let us now discuss a few ETFs focused on providing exposure to U.S. small-cap equities (read: Bet on Momentum with These ETFs & Stocks).

iShares Russell 2000 ETF IWM

This fund seeks to provide exposure to small-cap U.S. companies and tracks the Russell 2000 index.

It has AUM of $35.75 billion and charges a fee of 20 basis points a year. From a sector look, the fund has high exposures to Financials, Information Technology and Health Care with 18.16%, 16.97% and 14.91% allocation, respectively (as of August 8, 2017). The fund’s top three holdings are Kite Pharma Inc (NASDAQ:KITE) , Grubhub Inc (NYSE:GRUB) and Idacorp Inc (NYSE:IDA) with 0.30%, 0.25% and 0.23% allocation, respectively (as of August 8, 2017).

The fund has returned 13.69% in the last one year and 2.41% year to date (as of August 9, 2017). It currently has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.

iShares Core S&P Small-Cap ETF IJR

This fund is one of the most popular ETFs traded in the U.S. markets. It seeks to provide exposure to small cap companies.

It has AUM of $30.84 billion and charges a fee of 7 basis points a year. From a sector look, the fund has high exposures to Industrials, Financials and Consumer Discretionary with 18.77%, 16.18% and 15.84% allocation, respectively (as of August 8, 2017).

The fund’s top three holdings are MKS Instruments Inc (NASDAQ:MKSI) , Allete Inc (NYSE:ALE) and Healthcare Services Inc (NASDAQ:HCSG) with 3.84%, 2.64% and 1.89% allocation, respectively (as of August 8, 2017). The fund has returned 13.21% in the last one year and 0.21% year to date (as of August 9, 2017). It currently has a Zacks ETF Rank #3 with a Medium risk outlook.

Vanguard Small-Cap ETF (TO:VB)

This fund seeks to provide exposure to small cap U.S. companies and tracks the CRSP US Small Cap Index.

It has AUM of $19.07 billion and charges a fee of 6 basis points a year. From a sector look, the fund has high exposures to Financials, Industrials and Consumer Services with 26.3%, 19.9% and 11.9% allocation, respectively (as of June 30, 2017).

The fund’s top three holdings are Packaging Corp. of America (NYSE:PKG) , CBOE Holdings Inc. (NASDAQ:CBOE) and CDW Corp (NASDAQ:CDW) with 0.3% allocation each (as of June 30, 2017). The fund has returned 10.89% in the last one year and 4.09% year to date (as of August 9, 2017). It currently has a Zacks ETF Rank #3 with a Medium risk outlook.

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