VTWO ETF

In November, Fundstrat analyst Tom Lee mentioned to CNBC that small-cap stocks are likely to outperform the S&P 500 because they are currently undervalued and interest rates are expected to decrease. He predicted that small-cap stocks could exceed the S&P 500's performance by over 100% in the next few years.

The Vanguard Russell 2000 ETF (VTWO) was introduced on September 22, 2010. It is a passively managed exchange-traded fund that aims to provide wide access to the Small Cap Blend part of the US stock market.

The S&P 500 (^GSPC -0.29%) is the main indicator for the U.S. stock market, as it consists of 500 large companies that represent 80% of the market value of domestic stocks. On the other hand, the Russell 2000 is commonly used to measure small-cap stocks.

A stock market correction usually means a drop of 10% or more from recent peaks. Although the Dow Jones Industrial Average and S&P 500 haven't reached that point yet, the small-cap Russell 2000 index has.

The S&P 500 is the main U.S. stock market index that usually attracts the most focus. It includes a wide range of companies, but the top eight are large tech firms that lead in innovations like artificial intelligence (AI) and often show the highest revenue and earnings growth.

The stock market fell slightly after the latest interest rate decision by the Federal Reserve, but the major indices like the S&P 500 and Nasdaq remain close to their highest levels ever. However, small-cap stocks have been hit harder, with the Russell 2000 index dropping nearly 9% from its recent peak, nearing the 10% level that typically indicates a market correction. This might come as a surprise to some investors.

Analysts at Jefferies have predicted that the S&P 500 will reach a target of 6,000 by 2025. This estimate suggests a potential decline of around 1% from its current value of 6,050, making it one of the more pessimistic forecasts on Wall Street.

The Vanguard Russell 2000 Index Fund ETF follows small U.S. companies, mainly in the Industrial, Financial, and Health Care sectors. This ETF has low costs and provides wide diversification, with only a small focus on its top ten holdings. I believe that the earnings yield for VTWO's investments is around 5.40% at the moment.

The Vanguard Russell 2000 ETF (VTWO) was introduced on September 22, 2010. It is a passively managed exchange-traded fund that aims to provide wide access to the Small Cap Blend part of the US stock market.