How Earnings Season Can Wreak Havoc on ETFs

Most index exchange-traded funds (ETFs) are weighted by market capitalization. After all, a company’s market capitalization captures all potential factors used to determine a stock price beyond revenue and dividends. The downside of this approach is that a small group of large-cap stocks might control an oversized portion of the overall portfolio. As such, any downturn in these companies can have a significant impact on overall performance.