Small cap stocks tend to offer a bit more risk and reward. That equates to higher beta, which in turn tends to mean stronger returns when the broader market is healthy, and weaker returns when the broader market is in the doldrums.
So where are we now? Likely at an important juncture.
Small cap stocks as measured by the Russell 2000 (INDEXRUSSELL:RUT) and micro cap stocks as measured by the iShares Micro Cap ETF (NYSEARCA:IWC) are testing important support levels. Both indices rallied higher in August/September, breaking out above an 8-month trading range.