Market Capitalization: Large / Small
Highlights Trump's election victory means that there is potential for policy settings to flip from "easy money, tight fiscal" to "tight money, easy fiscal" The market implications of that shift are dollar bullish, bond bearish and equity mixed. The major risk is that violent currency and bond…
After a prolonged consolidation phase, small caps are now on the cheap side of fair value compared with large caps. We anticipate a return to premium valuations. The main driver will be a narrowing in the yawning profit margin gap. The chart shows that small companies have already experienced a…
Disappointing ISM surveys could signal a growth consolidation.
That, in turn, would spur a correction in risk assets.
The path of least resistance for the small/large cap ratio is higher. As outlined in our August 15 Weekly Report, small cap profit margins have already been crunched, while large cap margins are only just beginning to get squeezed. Wage trends between small and large companies argue for a closing…
The small vs. large cap ratio peaked in 2014 and should have experienced a tumultuous corrective phase, given that the bulk of the major equity indexes such as the Value Line and Wilshire indexes endured bear markets, driven by tightening financial conditions, credit concerns, a global…
Shift to a small vs. large cap bias as a stealth way to play the overall equity market overshoot. The oversold bounce in banks is not worth chasing, and buy dips in medical equipment stocks.
The latest rebound in risk assets raises the question of whether small caps have become more attractive compared with large caps. However, fundamental analysis signals little chance of a sustained recovery. While the relative P/E for small vs. large caps has downshifted out of overvalued…
A lack of confirming growth indicators puts the equity advance at risk. Lift hypermarkets to overweight, stick with homebuilders and fade any small and/or mid cap relative strength.
The Fed's decision to scale back intended interest rate hikes reflects economic reality.
Small caps have enjoyed a modest oversold bounce relative to large caps, but the latest NFIB survey of the small business sector warns that these gains are likely to fully reverse, and more. The tightening in domestic monetary conditions appears to have begun taking a toll on both small business…