Stock Market Internals Earnings Momentum, Small/Mid/Large Caps, Growth/Value/Cyclicals, and Additional Factors
After four tremendous quarters of growth, Q4 2018’s final Up/Down Ratio reads 1.46—below our long- term average of 1.51. We expect even lower results in the quarters to come.
After narrowly avoiding the “official” bear market label in December, the S&P 500 turned in its best monthly return in more than four years. Those forgotten rank-and-file firms finally found their voices and produced the widest monthly performance gap between the Cap and Equal Weight measures in more than eight years.
Since the latest trouble began on October 10th, the S&P 500 has experienced gains or losses in excess of 1% in 20 of the 39 trading days. Prior to October 10th, we saw only eight such days during the six month “melt up.” The Equal Weighted Average broke a four-month relative-performance losing streak to the Cap Weighted measure. Over the past 24 months: Cap Weighted +25.5%; Equal Weighted +18.4%.
After pulling the load for so long, the much loved FAANG stocks proved to be a liability for the index. Coming into the month, the FAANGs accounted for 12.8% of S&P 500 market cap. When October was through, the five firms made up 20% of the losses, wiping out a collective $330 billion (one XOM) in market cap.
Since the end of February—the last month Small Caps were under the historical 3.5% valuation premium—the Russell 2000 has outperformed the S&P 500: +16% versus +8%, respectively.
The recent run up in Small Cap stocks, coupled with a less rosy (though still fantastic) trailing earnings profile, has given us the largest Small Cap premium we’ve seen in three years.
Our Royal Blue Low P/E Tier finally outperformed the High P/E Tier for the first time since November. YTD, Value stocks still lag Growth in all market cap tiers.