There could be one slice of the group poised to outperform the rest, small-cap momentum stocks, said Ari Wald, head of technical analysis at"Momentum is the market anomaly in which stocks that have outperformed over the prior 12 months have a strong track record of continuing their outperformance," Wald told CNBC's "
" on Monday. "As the basis of our investment strategy, we're encouraged that it's working in this environment, too. For instance, the small-cap momentum ETF has rallied through big resistance relative to the Russell 2000,". "We see this as a part of a larger breakout dating back to 2013 and suggests they should continue to outperform within the small cap universe," Wald said.
Investors' portfolios should be exposed to small caps as part of a diversified strategy, said John Petrides, portfolio manager at Tocqueville Asset Management. ""We do recommend an allocation to small caps, ... given the sell-off but also more importantly given the quantitative easing that the Federal Reserve has done [which] has provided wind in the sails for small caps, which I think is why you've seen the rally really over the past six weeks," Petrides said during the same segment."There are going to be pockets that are going to have trouble within the small-cap universe," he said.
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