State Street sees more room in small-cap rally as SPSM, SLYG top 20% this year

According to CNBC, State Street Investment Management said the historic small-cap rally still has room to run, with global head of research strategists Matt Bartolini saying it is not a junk rally. Bartolini said more Wall Street firms are raising small-cap earnings expectations than cutting them, which points to higher earnings-per-share estimates for this year, including the third and fourth quarters, and he said this quarter will likely see more than 20% EPS growth. He also said all 11 small-cap GICS sectors are outperforming their large-cap peers, a pattern that has not occurred in over 30 years. State Street's SPSM and SLYG are both up more than 20% this year, while the Russell 2000 Index is also up close to 20% and had its best first half since 1991. Phil McInnis, chief investment strategist at Avantis Investors, said the rally should prompt investors to look beyond large caps and added that small caps are being overlooked by many investors. He also pointed to non-U.S. developed markets, emerging markets and mid-caps as areas where investors should consider adding exposure, and said the iShares Core MSCI Emerging Markets ETF, IEMG, is up more than 18% this year.