What Mid-Caps’ Leadership Says About The Economy

Hooper concurs, noting that during the 25 years through 2018 mid caps outperformed small and large caps, with mid-cap growth having an edge over mid-cap value.

One of the largest ETFs by assets under management for mid-cap growth shows the muscle behind the category. The Invesco Russell MidCap Pure Growth ETF (PXMG) is up 31 percent year to date. It has $625 million in AUM and an expense ratio of 0.39 percent. Its longer-term performance is stellar, too, up 29 percent on a one-year basis. PXMG has gained 27 percent on a three-year annualized basis and 15 percent on a five-year basis. The 10-year annualized return is 16 percent.

The fund is heavy on technology with a 47 percent weighting, while consumer cyclicals are at 19 percent and industrials at 15 percent.

For comparison, the SPDR S&P 500 Trust ETF (SPY) is up 14 percent on a three-year basis. It has gained 11 percent on average during the past five years and 15 percent annualized during the past 10 years. SPY’s largest sector by weight is technology, at 26 percent, with financials at 16 percent and healthcare at 14 percent.

The biggest overall mid-cap ETF by AUM is the iShares Core S&P Mid-Cap ETF (IJH), with $50.4 billion. The expense ratio is 0.07 percent. Its year-to-date return is 19 percent, and it has returned 6 percent during the past year, 12 percent on a three-year annualized basis and 9.5 percent on a five-year basis.  

As a mid-cap blend ETF, IJH’s sector weighting varies substantially from PXMG. Financials have the largest sector representation at 26 percent, with industrials at 16 percent and technology at 14 percent.

One of the larger smart beta mid-cap ETFs, the John Hancock Multifactor Mid Cap ETF (JHMM), is also outpacing the broader market year to date with a 20 percent return. It has $1 billion in AUM and an expense ratio of 0.45 percent. JHMM has returned nearly 8 percent during the past year, and is up 13 percent on a three-year average basis.

It has a similar makeup to IJH, with 20 percent of the fund in financials, 18 percent in industrials and 17 percent in technology.

Because mid caps tend to be a balance between small and large caps, during market retreats they generally hold up better than small caps but not as well as large caps, Hooper says.

Investors interested in the mid-cap space (and the same applies to large and small caps) need to delineate between growth and value funds, as well as how stocks might move in and out of the mid-cap designation because fast-growing mid caps could become large caps. And mid-cap value stocks can have their own issues.