Stock Market Internals Earnings Momentum, Small/Mid/Large Caps, Growth/Value/Cyclicals, and Additional Factors
Additional Factors
A heightening of the trade war coupled with a much more drastic inversion in the yield curve helped the S&P 500 slide lower in each of the four full weeks of May. The average return of the largest 25 firms in the index was buoyed by non-Tech firms for the first time in recent memory.
Earnings Momentum
Our Up/Down Ratio reads 1.52. As expected, the impossibly-high earnings growth rates of 2018 have reached from the grave to pull 2019’s figures down.
Small Cap vs Mid Cap vs Large Cap
Our Ratio of Ratios has now spent six consecutive months in the Small Cap discount zone—matching the duration of the only other contemporary discount streak set back in 2016.
Growth vs Value vs Cyclicals
What else is new, right? Growth has been a rocket ship to Value’s tricycle the past nine quarters. The valuation work has shown Growth stocks overvalued relative to Value for some time, but that doesn’t seem to be stopping the performance trend.
Additional Factors
In the span of 146 trading days, the index experienced a -20% trapdoor followed by a +25% rocket ship—bringing us right back to where we started. Microsoft has become the second firm in the S&P 500 to reach the $1 trillion market cap threshold.
Earnings Momentum
After four tremendous quarters of growth, Q4 2018’s final Up/Down Ratio reads 1.46—below our long- term average of 1.51. We expect even lower results in the quarters to come.
Small Cap vs Mid Cap vs Large Cap
This is the largest relative Small Cap/Large Cap discount we’ve tracked since June of 2003. After racking up some very good earnings, the absolute trailing P/E ratios for both market cap segments have come down significantly.
Growth vs Value vs Cyclicals
What else is new, right? Growth has been a rocket ship to Value’s tricycle the past nine quarters. The valuation work has shown Growth stocks overvalued relative to Value for some time, but that doesn’t seem to be stopping the performance trend.
Additional Factors
A steep nosedive followed by a roaring recovery. The index shrugged off an inverted yield curve in Q1. For now, the market prefers the narrative of the remedial powers of lower interest rates over the possibility of a slowing economy.
Earnings Momentum
Q4’s second month of earnings reports produced an Up/Down Ratio of 1.71. This is the lowest “two-month” figure of the past five quarters and, gasp… dangerously close to our long-term average.
Small Cap vs Mid Cap vs Large Cap
This is the fourth consecutive month that our Ratio of Ratios has resided in the Small Cap discount zone. Trailing P/E ratios have surged for Large Caps and Small Caps in the last two months.
Growth vs Value vs Cyclicals
Growth stocks reclaimed their dominant position over Value and now lead in every market cap breakdown YTD. Growth also looks overvalued compared to its own history and compared to Value stocks.
Additional Factors
The S&P 500 completed its best two month window of performance since the fall of 2010 and has leveled off at an interesting technical juncture—in line with the three false rallies of late 2018.
Earnings Momentum
Our first Up/Down Ratio for Q4 stands at 2.87. During the 2018 earnings bonanza, we’ve had a very wide range of stratospheric “one-month” readings (2.74 to 3.67).
Small Cap vs Mid Cap vs Large Cap
Our Ratio of Ratios normalized a bit in January. P/E expansion was a little more dramatic for Small Caps as the Russell 2000 posted its best monthly performance in eight years.
Growth vs Value vs Cyclicals
Our Deep Cyclical group, fresh off a -19% retreat in 2018, posted its best month of performance (+11.1%) since 2011.
Additional Factors
After narrowly avoiding the “official” bear market label in December, the S&P 500 turned in its best monthly return in more than four years. Those forgotten rank-and-file firms finally found their voices and produced the widest monthly performance gap between the Cap and Equal Weight measures in more than eight years.
Growth vs Value vs Cyclicals
Our tech-heavy Royal Blue Growth segment faltered toward the end of the year but held up better than any other segment in a rough 2018.
Small Cap vs Mid Cap vs Large Cap
This is the farthest our Ratio of Ratios has dipped into the Small Cap P/E discount zone since 2003.
Earnings Momentum
With Q3 earnings season complete, our Up/Down Ratio stands at 1.85. We’re now left with one quarter of the sweet 2018 vintage to report—but take note of the tough YOY comparison on deck.
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