FYI: Small-cap stocks have been lagging the market in recent months. Should you be worried?
Some commentators are, but I’m not so sure.
What is sure is that the S&P 500 index SPX, -0.74% has been one of the strongest market averages in recent months. Over the three months leading up to its July 26 all-time high, for example, it gained 3.4%, assuming dividends were reinvested. Over the same three months, the Russell 2000 index RUT, -0.83% (a widely-used benchmark for the small-cap sector) lost 0.8% and the iShares Micro-Cap ETF IWC, -0.39% lost 3.4%.
And there also can be no doubt that ahead of some major market tops in the past, small caps significantly lagged the large caps. This certainly was the case at the October 2007 bull-market high, which preceded the financial crisis and the bear market it induced — the stock market’s worst since the Great Depression.
But there have also been some past bull-market highs when the small-cap sectors were leading the large caps. This was the case at the top of the internet bubble, for example. Over the three months prior to the March 24, 2000, bull market high, for example, the Russell 2000 index gained 19.0%, versus “just” 5.1% for the S&P 500.
Regards,
Ted
https://www.marketwatch.com/story/small-cap-stocks-are-badly-lagging-the-sp-500-should-you-be-worried-2019-08-12/print
