We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Fed Boosts Main Street Lending: Small-Cap Growth ETFs to Buy
Read MoreHide Full Article
From March to April, the Federal Reserve announced multiple lending facilities to fight the COVID-19 crisis and save the economy from any deepening slump (per an article on Forbes). Most of the lending programs were aimed at providing broad-based liquidity to the economy. In fact, apart from cutting rates to zero and launching QE measures, the Fed started buying corporate bonds.
Fed Broadens Main Street Lending
Most recently, the central bank expanded its Main Street Lending Program. As the name suggests, the program is designed to boost small and mid-size companies hit hard by the coronavirus-led lockdown and recession. The central bank said on Jun 8 that it is lowering the initially stated minimum loan and raising the maximum that can be borrowed. Plus, it is expanding the loan terms to five years from four years.
Under the new guidelines, the minimum loan now will be $250,000, half the amount under the previous versions of the plan. The maximum will now differ by facility but could be up to $300 million from the previous $200 million.
The changes have probably been done based on feedback received from various sources. The new program also postpones the repayment period to two years from the original one year. Interest has also been delayed for one year and will be LIBOR, a commonly used overnight lending rate, plus 3%.
Small Caps to Benefit
The Fed’s Main Street Lending Program can be considered a plus for pint-sized stocks. The U.S. government’s virus relief bill should lend further support to small-cap stocks. There is already a $349 billion forgivable loan program in place (read: Fed Goes the Extra Mile: 6 ETF Areas to Win).
Investors should note that pint-sized stocks are more linked to the domestic economy. So, the reopening of economies, a solid jobs report and some better-than-expected economic data should do wonders for this segment.
U.S. manufacturing activity recovered from an 11-year low in May, in a sign that the worst of the COVID-19 economic crisis is probably over. The consumer sector looks to be on the mend. Visa’s total U.S. payments volume fell at a much slower clip in May from the previous month. This gives a clear indication of recovering consumer spending as lockdowns are lifted.
U.S. payments volume in May fell only to 5% compared with an 18% plunge in April. U.S. consumer confidence also gained in May, indicating upbeat economic activities in the coming days. Small-cap index Russell 2000 ETFIWM has gained 19.8% in the past month (as of Jun 8, 2020) versus 12.2% advance in the S&P 500.
ETF Picks
Against this backdrop, below we highlight a few small-cap growth ETFs that could be solid picks at the current level.
Vanguard SmallCap Growth ETF (VBK - Free Report) – Zacks Rank #2 (Buy); Up 22.2% past month
iShares SP SmallCap 600 Growth ETF (IJT – Zacks Rank #1 (Strong Buy); Up 18.1% past month
Janus Henderson Small Cap Growth Alpha ETF (JSML - Free Report) – Zacks Rank #1; Up 20.9% past month
iShares Morningstar SmallCap Growth ETF – Zacks Rank #1; Up 21.5% past month
Vanguard Russell 2000 Growth ETF (VTWG - Free Report) – Zacks Rank #1; Up 21.6% past month
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Fed Boosts Main Street Lending: Small-Cap Growth ETFs to Buy
From March to April, the Federal Reserve announced multiple lending facilities to fight the COVID-19 crisis and save the economy from any deepening slump (per an article on Forbes). Most of the lending programs were aimed at providing broad-based liquidity to the economy. In fact, apart from cutting rates to zero and launching QE measures, the Fed started buying corporate bonds.
Fed Broadens Main Street Lending
Most recently, the central bank expanded its Main Street Lending Program. As the name suggests, the program is designed to boost small and mid-size companies hit hard by the coronavirus-led lockdown and recession. The central bank said on Jun 8 that it is lowering the initially stated minimum loan and raising the maximum that can be borrowed. Plus, it is expanding the loan terms to five years from four years.
Under the new guidelines, the minimum loan now will be $250,000, half the amount under the previous versions of the plan. The maximum will now differ by facility but could be up to $300 million from the previous $200 million.
The changes have probably been done based on feedback received from various sources. The new program also postpones the repayment period to two years from the original one year. Interest has also been delayed for one year and will be LIBOR, a commonly used overnight lending rate, plus 3%.
Small Caps to Benefit
The Fed’s Main Street Lending Program can be considered a plus for pint-sized stocks. The U.S. government’s virus relief bill should lend further support to small-cap stocks. There is already a $349 billion forgivable loan program in place (read: Fed Goes the Extra Mile: 6 ETF Areas to Win).
Investors should note that pint-sized stocks are more linked to the domestic economy. So, the reopening of economies, a solid jobs report and some better-than-expected economic data should do wonders for this segment.
U.S. manufacturing activity recovered from an 11-year low in May, in a sign that the worst of the COVID-19 economic crisis is probably over. The consumer sector looks to be on the mend. Visa’s total U.S. payments volume fell at a much slower clip in May from the previous month. This gives a clear indication of recovering consumer spending as lockdowns are lifted.
U.S. payments volume in May fell only to 5% compared with an 18% plunge in April. U.S. consumer confidence also gained in May, indicating upbeat economic activities in the coming days. Small-cap index Russell 2000 ETF IWM has gained 19.8% in the past month (as of Jun 8, 2020) versus 12.2% advance in the S&P 500.
ETF Picks
Against this backdrop, below we highlight a few small-cap growth ETFs that could be solid picks at the current level.
Vanguard SmallCap Growth ETF (VBK - Free Report) – Zacks Rank #2 (Buy); Up 22.2% past month
iShares SP SmallCap 600 Growth ETF (IJT – Zacks Rank #1 (Strong Buy); Up 18.1% past month
Janus Henderson Small Cap Growth Alpha ETF (JSML - Free Report) – Zacks Rank #1; Up 20.9% past month
iShares Morningstar SmallCap Growth ETF – Zacks Rank #1; Up 21.5% past month
Vanguard Russell 2000 Growth ETF (VTWG - Free Report) – Zacks Rank #1; Up 21.6% past month
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>