Thursday, April 30, 2015
Tracking The Money Flows
On a year to date basis, investors have sold out of U.S. Large Cap stocks en masse. As of yesterday, more than $40 billion had left the asset class since December 31st (most of that coming out of the SPY ETF). This made a fair amount of sense as Small and Mid Cap stocks had reasserted themselves in the year's first 3 and a half months and handily outperformed Large Caps. Part of this should be attributed to mean reversion as Large Caps crushed Mid and Small last year but we see the dollar's moves as the major contributor.
Mid and Small Caps are still outperforming the S&P 500 on a year to date basis but the senior index definitely gained some relative strength in the 2nd half of the month. We'll continue to use the dollar's moves as one of our primary inputs when looking for strength by market cap. Case in point, the dollar has fallen further today and while most markets are down, Small Caps are really feeling it with the IWM down nearly 2%.
Ryan Worch is the Managing Director of Worch Capital LLC. Worch Capital LLC is the general partner of a long/short equity strategy that operates with a directional bias and while emphasizing capital preservation at all times.
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