Trump lifts US small caps to record high

Russell 2000 index charges ahead following election upset
Thursday 24 Nov 2016 Author: Tom Sieber

The Russell 2000 index is steaming ahead. The main US small cap index is riding the Trump bump along with the S&P 500, Dow Jones Industrial Average and NASDAQ Composite. All these indices closed at record highs on 21 November.

Russell 2000 +10.6% since
Trump election win

Stocks on the Russell 2000 are arguably the greatest beneficiaries of president-elect Donald Trump’s promised $500m plus of infrastructure spend and pledge to cut corporation tax due to their domestic focus.

This is reflected in the performance of the index since Trump’s shock win. It is up 10.6% against a 3.4% advance for the NASDAQ Composite and 2.7% advance for the S&P 500.

The median market cap of stocks on the Russell 2000 is $706m and the largest stock is valued at more than $6.5bn. The top five sectors are financial services, technology, producer durables, consumer discretionary and healthcare.

Few of its constituents would be household names on this side of the pond but Build-A-Bear Workshop (BBW:NYSE) may be familiar to parents of small children given its UK high street presence.

Investors need to decide how much of the benefits from Trump’s expected business-friendly policies have been priced in.

There are several ways to play US small caps. A handful of UK exchange-traded funds (ETFs) offer direct exposure to the Russell 2000, the cheapest of which is SPDR Russell 2000 US Small Cap (R2US) with a total expense ratio of 0.3%.

Mutual funds with a US small cap focus include Aberdeen Global – North American Smaller Companies (LU0566484027) and CF Miton US Opportunities (GB00B8278F56)

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