Small Caps are underperforming. What does that mean for the broader market?
On Thursday of last week, Jurrien Trimmer the Director of Global Macro at Fidelity Investments tweeted the following:
Is this true? Is underperformance in Small Caps a harbinger of more widespread weakness in stocks? A look at the last 10 years should give clients comfort. This statement certainly dows not seem to carry weight historically.
The chart below shows SPY (benchmark S&P500 in blue)) in the upper panel and the relative performance of Small Cap-Russell 2000 (IWM) versus SPY (in black) in the lower panel
There are long periods of underperformance for IWM in 2014, 2017, 2019, and 2021 when the S&P500 had huge rallies. Most of the highlighted periods below constitute at least 12 months of gains for the benchmark.
Jeff Marcus founded Turning Point Analytics (TPA) in 2009 after 25 years on trading desks and 13 years as a head trader to provide strategic and technical research to institutional clients. Turning Point Analytics (TPA) provides a unique strategy that works as an overlay to clients’ good fundamental analysis. After 10 years of serving only large institutions, TPA now offers its research services to mid and small managers, RIA’s, and wealthy sophisticated individuals looking for a way to increase their returns and outperform their peers.
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