The latest Up/Down ratio is 1.64—the second consecutive above-average reading for this vignette. Since the GFC, outperforming quarters have most commonly appeared in chunks of four or five. Still, for now, the story of EPS-growth expansion continues to gain steam.

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It’s been five long years since Small Caps had their last sustained relative-strength rally: From November 2020 through March 2021, the S&P 600 gained an astounding 51% versus the S&P 500’s +22%.

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Last month, Royal Blue Value (+3.5%) outdid RB Growth (-4.1%) for the first time since April 2022. Over the last two years, Royal Blue Growth is up 52%, just a bit more than Royal Blue Value’s gain of 51%.

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Five of the Magnificent Seven firms ended November in the red. Despite that turbulence at the top, the S&P 500 still managed to eke out a gain for the seventh-consecutive month. The valiant November effort from the index’s 2025 underdogs—Value, High Dividend, Low Volatility, and Equal Weight—won’t change much in the final assessment of the year.

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The Up/Down ratio reads 2.14. We have to go all the way back to October 2021 to find a higher “one-month” ratio. Aside from the Q1-25 hiccup, the ratio has advanced the past seven quarters and now sits at a level generally associated with a robust economy.

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An 8.5% gain, modest by Nvidia standards, propelled that firm to a congruent 8.5% weight in the S&P 500—a new record. The semiconductor firm also achieved the stock market’s first $5 trillion valuation last month. That’s a little larger than the annual economic output of Germany—or the combined output of Central and South America.

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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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The Russell 2000 (lower-quality firms) has gained 12% YTD, while the higher-quality S&P 600 has advanced only 4%. Since we need P/E ratios to calculate this measure, firms with no earnings are excluded. For that reason, the ratio continues to sag.

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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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Small Cap Growth continued its surge over Small Cap Value. From March forward, SC Growth has gained 30% versus +18% for SC Value.

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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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