Stock Market Internals Earnings Momentum, Small/Mid/Large Caps, Growth/Value/Cyclicals, and Additional Factors
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.
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.
The first six months of 2022 have been unpleasant for risk indexes of every stripe. The S&P 500 (World’s Reserve Index) returned almost precisely -20% and its constituents lost $8.45 trillion in market value. Poof, gone. Similar first-half losses by the S&P 400 (-19.5%) and the S&P 600 (-18.9%) resulted in paper forfeitures for its member firms of “only” $518 billion and $221 billion, respectively.
The gyrating S&P 500 found a way to end the month perfectly flat. Retailers, casinos, hotels, and resorts all felt the pressure of passing along higher prices to consumers. Energy firms benefiting from an increased slice of consumers’ budgets made up most of the top-25 performing firms in May. That sector has grown from 2.7% of the S&P 500 to 4.8% in the first five months of 2022.
Those once high-flying FAANG stocks continue to run into rough pockets of air. Following Facebook’s 33% dive in February, Netflix (-49%), Amazon (-24%), and Google (-18%) followed suit in April as the latter two trillion-dollar firms posted their worst monthly returns since 2008. Only Apple—which still carries an enormous 7% weight in the S&P 500—has avoided a recent gut-wrenching plunge.