Thursday, April 23, 2015

YTD Relative Strength - US Large Caps Take A Rest

As the S&P 500 meanders about in this several months long range, it's impossible to ignore the action taking place in certain individual names, sectors, countries and even asset classes.  Many investors and fund managers have been, for years, clamoring for more of a "stock picker's" market and it looks like that environment has arrived, for now at least.

Last year (until the 4th quarter), the S&P 500 and large cap stocks in general marched steadily upward en route to double digit returns.  Meanwhile, most other broadly followed markets struggled to eke out even the smallest of gains.  For example, per Raymond James by way of Perritt Capital, the S&P returned 8.8% more than the Russell 2000 in 2014.  This was the best annual relative return for large-cap vs. small-cap stocks since 1998.  And at the beginning of October, the Russell was actually trailing the S&P by a staggering 16%.  However, over the last 3 months of the year and through the first quarter, small caps have staged a comeback.  They closed the gap in 4Q 2014 and have outperformed large caps by nearly 300 basis points so far this year.

This theme remains fairly constant as you look through a number of other sectors and asset classes and has finally provided investors the opportunity to log gains outside of US Large Cap stocks.  Below is a look at the YTD performance of a variety of sectors/countries/asset classes.  While the S&P takes a much deserved breather, we've seen areas like Biotech, Health Care and Consumer Discretionary take the baton on a sector basis.  Looking globally, China has been on fire, Europe had a very strong first quarter and even Emerging Markets recently joined the party.

And as we write this blog, Bespoke tweets the following:

Another example of the tenor of this market changing ever so slightly.  While gains in Large Caps have been harder to come by this year, there are still plenty of places to make (and yes, lose) money. 

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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