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Stock Market Internals Earnings Momentum, Small/Mid/Large Caps, Growth/Value/Cyclicals, and Additional Factors

Jan 07 2023

Looking For A Bright Spot

  • Jan 7, 2023

Our Up/Down ratio ends the Q3-22 earnings season with a pitiful reading of 1.07—very near the previous two quarter’s “final readings.” This vignette hasn’t had much longer stretches at such low levels (outside the Financial Crisis). Perhaps a sign we’re in the latter innings of an EPS downturn?

Jan 07 2023

Small Cap vs. Mid Cap vs. Large Cap

  • Jan 7, 2023

Our Ratio of Ratios ends 2022 at a two-and-a-half-year low. Like 2019, 2020, 2021, and 2022, Small Caps seem primed for outperformance in 2023. Some kind of economic turmoil (perhaps underway) is probably needed to jolt them back into favor.

Jan 07 2023

Growth vs. Value vs. Cyclicals

  • Jan 7, 2023

At the end of November 2022, Royal Blue Value saw its largest twelve-month-rolling return gap (43%) over Royal Blue Growth since 2001.

Jan 07 2023

Additional Factors

  • Jan 7, 2023

We wrap up 2022 with the S&P 500’s only positive performance quarter for the year—ending the longest quarterly losing streak (three quarters) since the Financial Crisis (six quarters). The year also drew some comparisons to the deflation of the Tech Bubble, as S&P 500 Value (-5%) demolished S&P 500 Growth (-29%) by the widest margin since Y2K.

Dec 07 2022

Earnings Momentum

  • Dec 7, 2022

After a decent start with the Q3 “one-month” reading, the ratio is back down in familiar territory; every quarter this year has now registered a “two-month” reading between 1.04 and 1.08. Values in that range have always been associated with a recession.

Dec 07 2022

Small Cap vs. Mid Cap vs. Large Cap

  • Dec 7, 2022

After a month of Small Cap underperformance versus Large Caps, our Ratio of Ratios has crashed through contemporary lows. On a relative basis, only the three months that followed the onset of the pandemic registered deeper discounts for Small Caps.

Dec 07 2022

Growth vs. Value vs. Cyclicals

  • Dec 7, 2022

In the last year, Royal Blue Value (+17%) has dominated Royal Blue Growth (-26%). That is almost a mirror image of the nine-month run for Growth between November 2019–September 2020: Royal Blue Growth +30%; Royal Blue Value -9%.

Dec 07 2022

Additional Factors

  • Dec 7, 2022

The S&P 500 ended November 14% higher than its contemporary low seven weeks earlier. Last month contained two of the three best trading days (+5.5% and +3.1%) since April 2020, as a mild consumer inflation reading and dovish Fed Chair comments buttressed hopes for a policy pivot.

Nov 05 2022

Eye on Earnings

  • Nov 5, 2022

With the first month of Q3-22 earnings in the books, our Up/Down ratio is 1.42, which is markedly better than the first two quarters (1.09 each). However, given falling estimates, the latest uptick probably isn’t the start of something bigger.

Nov 05 2022

Small Cap vs Mid Cap vs Large Cap

  • Nov 5, 2022

Our Ratio of Ratios had a slight rebound from September’s contemporary lows. The October bounce was more pronounced in Small Caps, as that flavor of equities had its best monthly performance, relative to Large Caps, since February.

Nov 05 2022

Growth vs Value vs Cyclicals

  • Nov 5, 2022

Our best-performing style box in October, Royal Blue Value (+14.2%), clawed its way into positive territory (+0.8%). All five of the other style boxes are trailing RB Value by 12-32% YTD.

Nov 05 2022

Additional Factors

  • Nov 5, 2022

Value stocks have had incredible performance relative to Growth. At the end of October, IVE (iShares S&P 500 Value) had a 20% YTD advantage over IVW (iShares S&P 500 Growth). That’s easily the largest annual performance gap in favor of Value: Over the 22-year history of data, no other year reached double digits.

Oct 07 2022

Earnings Momentum

  • Oct 7, 2022

With the final month of Q2-22 earnings complete, our Up/Down ratio reads 1.02. That is very close to the 1.05 ratio for Q1. Both readings fall below the vignette’s recession threshold of 1.07 (in the past 39 years, all readings below that mark were accompanied by an “official” economic recession).

Oct 07 2022

Small Cap vs. Mid Cap vs. Large Cap

  • Oct 7, 2022

This is the lowest relative valuation registered for Small Caps since May 2020. The end of September also marked the lowest absolute trailing valuations for both Large Caps (20.7x) and Small Caps (15.0x) in our L3000 universe looking back to April 2020.

Oct 07 2022

Growth vs. Value vs. Cyclicals

  • Oct 7, 2022

More pain for our Royal Blue Growth segment (Large Growth proxy). Q3 performance (-6.9%) was the worst for our style boxes and contrasted against the other Growth boxes (SC Growth +0.2%, MC Growth -0.6%).

Oct 07 2022

Additional Factors

  • Oct 7, 2022

The S&P 500 pegged its third consecutive quarterly loss, a remarkable feat for the Index. It hadn’t produced back-to-back quarterly losses (total return) since the Great Financial Crisis. Investors opening their quarterly statements in the next week or so, accustomed to a sharp reversal of losses like those in 2011, 2015, 2019, and 2020 may be in for a surprise.

Sep 08 2022

Earnings Momentum

  • Sep 8, 2022

With the second month of Q2-22 earnings in the books, our Up/Down ratio is 1.04; levels this low have always been accompanied by an economic recession. It’s hard to make a case why this go-round would be any different.

Sep 08 2022

Small Cap vs. Mid Cap vs. Large Cap

  • Sep 8, 2022

Like puka necklaces and Ska music, Small Cap stocks are having a hard time coming back into favor. Our Ratio of Ratios has been below its median premium for almost four years. A near-term recession may push this relationship even lower, initially, but could provide a catalyst to return to a more “normal” figure.

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Sep 08 2022

Growth vs. Value vs. Cyclicals

  • Sep 8, 2022

After surging in July, our Royal Blue Growth segment (-6%) led all other style boxes in August. Since the end of November 2021: Royal Blue Growth = -28%, Royal Blue Value = +3%.

Sep 08 2022

Additional Factors

  • Sep 8, 2022

The back end of August saw the S&P 500 give up about half of the 17% gain achieved from June’s closing low. The nine week bear-market bounce was fairly uniform across the major indexes: S&P 400 +19%, S&P 600 +19%, and the Nasdaq Composite +23%. Over the course of the bounce, impressive gains from AAPL +33%, AMZN +40%, and TSLA +44% accounted for roughly a fourth of the S&P 500’s advance.