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

Nov 06 2020

Earnings Momentum

  • Nov 6, 2020

As we start Q3-2020 reporting, our first Up/Down ratio reads 1.14. Although this observation is in the eighth percentile of our 37 years of data, it is shockingly better than the two quarters that preceded it (0.72 and 0.63).

Nov 05 2020

MTI Slips To Negative

  • Nov 5, 2020

Read this week's Major Trend.

Nov 06 2020

Small Cap vs Mid Cap vs Large Cap

  • Nov 6, 2020

Small Cap Discount = 22%

Using non-normalized trailing operating earnings, Small Caps are selling at a 22% valuation discount to Large Caps, as illustrated in the chart. Since the market lows in March, we’ve seen a steady uptrend in Small Cap performance (Russell 2000 +55%, S&P 500 +46%). However, the valuation gap between the two flavors remains historically very wide, thanks to the previous four years of Large Cap outperformance. Based on full-year 2021 earnings estimates (see table), Small Caps are also at a 22% discount to Large Caps.

Nov 06 2020

Growth vs Value vs Cyclicals

  • Nov 6, 2020

Small Cap Value was the top performing style box in October—the first time in recent memory. Its YTD underperformance versus our Royal Blue Growth segment is still nearly 40%.

Nov 06 2020

Additional Factors

  • Nov 6, 2020

S&P 500: Election Reverses “Young” Trend

Oct 07 2020

Earnings Momentum

  • Oct 7, 2020

With Q2-2020 reporting now finished, our final Up/Down ratio reads 0.74. This is slightly better than Q1’s 0.71 reading (although both are historically abysmal).

Oct 07 2020

Small Cap vs Mid Cap vs Large Cap

  • Oct 7, 2020

Using non-normalized trailing operating earnings, Small Caps are selling at a 24% valuation discount to Large Caps. Our Ratio of Ratios has now spent two full years below the 2% long-term-median premium for Small Caps.

Oct 07 2020

Growth vs Value vs Cyclicals

  • Oct 7, 2020

Our Deep Cyclical Group gained 18%, besting Royal Blue Growth (+15%) for the first time in recent memory. Growth stock valuations are stretched to 1999 extremes. Value, while historically overvalued, is a relative steal.

Oct 07 2020

Additional Factors

  • Oct 7, 2020

AAPL (-10%), MSFT (-7%), AMZN (-9%), GOOG (-10%), and FB (-11%) all underperformed individually, and as a group, for only the second time in the last twelve months. Did these firms’ popularity hit a peak in that first week of September, or was it just a much needed breather?

Sep 05 2020

Earnings Momentum

  • Sep 5, 2020

With the second month of Q2-2020 in the books, our Up/Down ratio reads 0.72. We agree that Q2 earnings have come in better than expected, but in this binary study of the “ups” versus “downs,” that element of managed expectations is not captured.

Sep 05 2020

Small Cap vs Mid Cap vs Large Cap

  • Sep 5, 2020

Using non-normalized trailing operating earnings, Small Caps are selling at a 22% valuation discount to Large Caps. August marks the sixth consecutive month that our Ratio of Ratios has indicated a 20% or greater Small Cap discount.

Sep 05 2020

Growth vs Value vs Cyclicals

  • Sep 5, 2020

And all that winning has translated into an extreme stretch in valuations. The median P/E ratio of our Royal Blue Growth segment is now 90% higher than its average measured back to 1982.

Sep 05 2020

Additional Factors

  • Sep 5, 2020

In August, the S&P 500 notched its fifth consecutive monthly gain with the five largest firms accounting for nearly half of its 7% advance. Those companies are now within spitting distance of comprising 25% of the index—that’s a doubling of market cap for the five largest firms in just under three years.

Aug 06 2020

Earnings Momentum

  • Aug 6, 2020

With the first month of Q2-2020 earnings in the books, our Up/Down ratio reads 0.63. This pathetic “one-month” figure joins only four other readings below 0.70 in our 36-year history.

Aug 06 2020

Small Cap vs. Mid Cap vs. Large Cap

  • Aug 6, 2020

Small Caps are selling at a 25% valuation discount to Large Caps. The absolute P/E ratios for both cap flavors have risen roughly 40% from their March month-end lows.

Aug 06 2020

Growth vs. Value vs. Cyclicals

  • Aug 6, 2020

For our Royal Blue segments, the Growth/Value P/E ratio is heading toward Y2K extremes at tremendous speed. We started the year near our long-term average of 2.23x and today it stands at 3.19x—easily the highest reading outside of the Tech Bubble.

Aug 06 2020

Additional Factors

  • Aug 6, 2020

Year-to-date, the Equal Weighted S&P 500 has massively underperformed the Cap Weighted index. The return spread of 8.85% (price change) is the widest seven-month performance gap in favor of the Cap Weighted index since the top of the Tech Bubble.

Jul 07 2020

Earnings Momentum

  • Jul 7, 2020

Our final Q1 Up/Down ratio reads 0.71. This miserable “three-month” figure is in line with the darkest three quarters of the Great Recession—the worst scores in our 27-year history.

Jul 07 2020

Small Cap vs Mid Cap vs Large Cap

  • Jul 7, 2020

Three consecutive months of outperformance for Small Caps lifted our Ratio of Ratio from its contemporary low set in March. Trailing P/E ratios for both Large and Small-Cap segments are bound to feel significant upward pressure in the coming months as better earnings results roll off the back-end.

Jul 07 2020

Growth vs Value vs Cyclicals

  • Jul 7, 2020

The market’s love affair with anything “Growth” is translating into the most expensive market-capitalizations for the growth segments that we’ve recorded since the Tech Bubble.