.The Russell 2000 may have an earnings problem.Though the small-cap mark gained 10.1% in July, it is actually lost around 4% so far in August, as of Thursday morning.ALPS' Paul Baiocchi chalks up the volatile relocate to the index's total arrangement, along with a quote coming from Apollo Global revealing 40% of those firms possess negative incomes." [Investors] have generally resigned themselves to the reality that by residing in the Russell 2000, I am actually only visiting need to take the really good with the negative," the organization's chief ETF strategist said to CNBC's "ETF Advantage" this week.To stay clear of the earnings drag, Baiocchi advises clients focus on quality business, taking a look at even more discerning exchange-traded funds such as his firm's mountain range O'Shares USA Small-Cap High Quality Reward ETF Allotments (OUSM)." The suggestion is actually top quality companies that pay out and also develop their rewards, and also essentially, possess much less volatility than their peers," he said. "It makes it possible for consultants and also capitalists that have seen small caps go sidewards for five years to be alloted to a category that's delayed." In addition to its own productivity monitor, the fund includes only 107 inventories u00e2 $" a fraction of what is actually inside the Russell 2000. Its own best 3 holdings are actually Tradeweb Markets, Juniper Networks and also Old Commonwealth International, each resting at an approximately 2% weighting in the fund, per FactSet.Shares of the small-cap fund are down 1.5% month to date u00e2 $" outmatching the Russell by greater than 2 amount points during that time.Disclaimer.