The Up/Down ratio reads 1.51. This is the first time the “three-month” tally has been above the vignette’s 41-year average since Q3-21 (15 quarters ago). Both the level and the momentum of this survey would suggest that an economic recession is not imminent.

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Small Caps have come alive the past two quarters with the Russell 2000 posting a 21% price increase. Why hasn’t our Ratio of Ratios turned higher (lower SC discount)? This vignette excludes firms with no earnings. Note that the higher-quality S&P 600 has gained 13% since the end of March.

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Russell 2000 Growth gained 26% since the end of March—the largest two-quarter bump for that index measured back to 2020. It fell just short of eclipsing its all-time high set in February 2021.

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With the second and third quarters’ results in the books, 2025 is back to following the exact same playbook seen the past two years. The eight largest firms in the S&P 500 posted an average return of +50% since the end of Q1. That octet—now a 37% index weight—has contributed a little over two-thirds of the S&P 500’s +20% return during the last six months.

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The Up/Down ratio reads 1.52 and is the highest “two-month” tally since the beginning of 2022. Like our “one-month” figure from July’s reports, this observation is just slightly above the study’s 41-year average. Forward earnings for small- and mid-cap indexes are finally coming alive as well.

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The S&P 600 had its best month (+7%) relative to the Equal Weighted S&P 500 (+3%) since November 2024. Measured back to April, our Small Cap discount has shrunk from 26% to 19%.

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Small Value stocks (+9%) posted their best return since November 2024. Within our L3000 universe, this style box’s median P/E multiple is still well below its 43-year average.

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Trends in place since the April 9th tariff pause took a little break in August. Within the S&P 500: Value beat Growth, the Top-Ten Index lagged, the Momentum Factor Index underperformed, and High Dividend stocks surpassed all for the first time in four months.

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The Up/Down ratio reads 1.84. This figure is above our 41-year average of 1.82 for the first time since January 2022. That gap of 13 quarters between above average “one-month” readings matches the longest previous streak, which was the lead-up to and during the depths of the Financial Crisis.

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This is the narrowest discount the vignette has registered in three-and-a-half years, although we’re not far off the 25% average discount for the period.

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Our Deep Cyclical Group has been on a tear over the past three months, rising 18%. The S&P 500 High Beta Index has done even better, with a 30% gain over that time.

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NVDA’s 13% gain contributed just under half of the S&P 500’s +2.2% return for the month. The chipmaker ended July with an 8.1% index weight. Since 1990, there’s never been an 8% month-end weight from a single firm. The weight of NVDA and MSFT is equal to the combined weight of the smallest 332 firms in the S&P 500.

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The Up/Down ratio reads 1.31—below average. The first quarter’s earnings reports failed to build on 2024’s broadening, but still modest EPS growth story. A reversion to the awful figures of 2022 and 2023 is not guaranteed, although trends in this data have been quite binary, especially over the last ten years.

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For the first time since November 2024, the Russell 2000 posted a better monthly return than the S&P 500! The excellent Q2 results for each segment have pushed up their absolute valuations, but both are still well short of their contemporary highs.

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Value in Q1, Growth in Q2.

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As the market dismissed wild trade-policy uncertainty and the U.S. lobbing missiles at Iran, the index posted a tidy +11% for Q2 (following a Q1 loss of 4%). A little over half of the S&P 500’s return of the last three months was contributed by inspired performance from Microsoft (+33%), Nvidia (+46%), and Broadcom (+65%).

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The Up/Down ratio reads 1.30—below average. This “two-month” print breaks a streak of four successively higher readings, and is even more disappointing given that last year’s look-back comparison for this “two-month” period was very weak (1.18).

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Our Ratio of Ratios continues to go nowhere, as six of the past seven months registered a Small-Cap discount of either 25% or 26%. Large-Cap outperformance and a worsening Small-Cap earnings profile seem to have balanced out overall relationship.

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In the Large- and Mid-Cap spaces, Growth’s two-month surge erased Value’s YTD advantage. Since the end of March, RB Growth: +11%; RB Value: -3%; MC Growth: +13%; MC Value: +2%.

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The 19% surge from the closing low on April 8th, through May, has been fueled by the largest firms. Out of the Mag 7 names, only Apple (+17%) underperformed the overall index; the average gain among the other six registers at +33%. Let’s not forget, it was these very names that led the S&P 500 lower—and the equal-weighted Mag 7 basket is still down 5% YTD.

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