This year’s tech-led rally has led many Wall Street pros to worry about a narrow market, but some investors are betting that the gains will soon broaden out. The iShares Russell 2000 ETF (IWM) and Invesco S & P 500 Equal Weight ETF (RSP) have attracted inflows of over $4 billion and about $1.8 billion so far this month, according to FactSet. Both funds provide investors a way to get broad exposure to the stock market while reducing the impact of names like Nvidia and Alphabet on their portfolios. “Interest in funds outside of core S & P exposure has increased with notable inflows and volumes into the equal-weight S & P 500 (RSP) and Russell 2000 (IWM) recently. These funds – along with a host of other non-Tech exposed ETFs – are seemingly a preferred way to play a catch-up trade,” Strategas ETF strategist Todd Sohn said in a note to clients on Tuesday. So far, the shift by investors into these funds is working in June. Through Tuesday, the IWM has climbed more than 8% month to date, while the RSP has added 5.7%. Meanwhile, the Nasdaq 100 has gained 4.5%. IWM 1M mountain Small caps are off to a strong start in June. Both funds also sport low fees, with an expense ratio of 0.20% for the RSP and 0.19% for the IWM. Another option for investors looking to diversify away from large technology companies could be international funds, Sohn said. “Looking abroad, investors are waking up to Japan with inflows on the rise (well short of 2013 though) and we’d note Japan ETFs offer a helpful counter to Tech-heavy U.S. benchmarks,” he said. Sohn also added in an email that the Invesco S & P SmallCap Revenue ETF (RWJ) could be another fund that fits this trend, though its recent inflows have been minimal.
