Stock Market Internals Earnings Momentum, Small/Mid/Large Caps, Growth/Value/Cyclicals, and Additional Factors
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.
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.
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 Ratio of Ratios has been stuck in the Small Cap premium range of 2% to 7% for the last ten months—limiting the ability to make a call on market cap preference with this vignette.
Like a thirty-year-old still living with his parents, the market doesn’t seem to have much direction. Since 1950, the median recovery time (if the market does indeed recover) from an intermediate correction is just 33 trading days. We’re now going on 80 trading days since the low set on February 8th… tick tock.
Growth’s year-and-a-half dominance over Value continues to roll on. Growth’s substantial gains have almost erased Value’s long-standing relative valuation premium.
Other than an initial bump in the Small Cap premium in March, Small Caps’ last three months’ outperformance hasn’t manifested itself in this vignette.
After Q1’s record breaking “one-month” figure, our “two-month” reading could only disappoint. Still, May’s Up/Down Ratio of 2.01 is one of the highest “two-month” figures in 35 years of observations.
Up/Down Earnings: A Little Shrinkage