Stay-at-home small caps in vogue as dollar roils multinationals

New York

LIKE New Yorkers trying to avoid a blizzard, sometimes the best decision is to stay home. That may be the better strategy for stock investors as US companies with a more domestic focus have outperformed multinationals.

Small-cap equities are having the best start to a year since 2012 relative to their more internationally diverse counterparts, and investors are taking notice. The iShares Russell 2000 exchange traded fund (ETF) tracking the index of smaller, less globally exposed stocks absorbed more than US$1 billion in just four days of trading last week, while money flowed out of funds for large-cap companies.

The strongest dollar in a decade is making American goods and services more expensive overseas, eroding sales. The Dow Jones Industrial Average tumbled 1.7 per cent on Tuesday as companies from Procter & Gamble Co (P&G) to DuPont Co and Pfizer Inc became the latest to cite the greenback's strength as a major headwind for profits. The Russell 2000 Index, meanwhile, lost only 0.5 per cent on a day in which Wall Street tra…