Stock Market Internals Earnings Momentum, Small/Mid/Large Caps, Growth/Value/Cyclicals, and Additional Factors
Additional Factors
There was a lot less Christmas cheer with the market down 15% through Christmas Eve. The S&P 500 was propped up by a few big firms in 2018. Our 25-Largest firm average ended the year in positive territory and bested the Equal Weighted Average by almost 11%.
Earnings Momentum
Our second Up/Down Ratio of Q3 stands at 1.88—this is the weakest “two-month” reading we’ve seen in the last four quarters. The energy selloff has us thinking about the up/down struggles of the 2014-15 Energy-sector earnings washout.
Small Cap vs Mid Cap vs Large Cap
Small Caps are selling at a 2% valuation discount to Large Caps. Our Ratio of Ratios moved into the Small Cap P/E discount zone for the first time in 15 months.
Growth vs Value vs Cyclicals
Our tech-heavy Royal Blue Growth segment underperformed for the second month in a row. Despite these rare missteps, the group still has a solid YTD return of +8.7%.
Additional Factors
Since the latest trouble began on October 10th, the S&P 500 has experienced gains or losses in excess of 1% in 20 of the 39 trading days. Prior to October 10th, we saw only eight such days during the six month “melt up.” The Equal Weighted Average broke a four-month relative-performance losing streak to the Cap Weighted measure. Over the past 24 months: Cap Weighted +25.5%; Equal Weighted +18.4%.
Earnings Momentum
Our first Up/Down Ratio of Q3 stands at 2.74—the third highest “one-month” figure of the past 34 years. However, it’s by far the lowest “one-month” figure of the past three quarters.
Small Cap vs Mid Cap vs Large Cap
The recent plunge in our Ratio of Ratios is due to significant underperformance in Small Caps. Since the end of August: Russell 2000 -13%; S&P 500 -6%.
Growth vs Value vs Cyclicals
Large Cap Value stocks were the best place to weather last month’s storm as Royal Blue Value lost “only” -6.1%. Small Cap Growth plunged 12.6%.
Additional Factors
After pulling the load for so long, the much loved FAANG stocks proved to be a liability for the index. Coming into the month, the FAANGs accounted for 12.8% of S&P 500 market cap. When October was through, the five firms made up 20% of the losses, wiping out a collective $330 billion (one XOM) in market cap.
Earnings Momentum
We’ve reached the halfway point of the 2018 corporate earnings bonanza! The final Up/Down Ratio for Q2 2018 stands at 2.06—the highest “three-month” figure we’ve seen since 1984.
Small Cap vs Mid Cap vs Large Cap
The sharp divide in performance between Small Caps and Large Caps moved our Ratio of Ratios below the long-term median premium for the first time in seven months.
Growth vs Value vs Cyclicals
Growth stretched its fantastic contemporary outperformance run to seven quarters, besting Value stocks once again. Since the end of 2016: Royal Blue Growth +53%; Royal Blue Value +21%.
Additional Factors
The S&P 500 posted its best quarterly price gain (+7.2%) since the fourth quarter of 2013. However, 37% of the year-to-date returns have come from three stocks: Amazon, Apple, and Microsoft. Those three firms have added a combined $737 billion in market cap since the start of the year.
Additional Factors
The modest January air pocket went completely unnoticed by the index’s largest firms. Between the market peaks, Microsoft, Apple, and Amazon gained 15%, 26%, and 36%, respectively—adding a combined $495 billion to their market values.
Growth vs Value vs Cyclicals
After a brief surge in July, the seemingly-cursed Value stocks quickly resumed their roles as underperformers. Our Royal Blue stock lists (institutional favorites) continue to stretch their valuations higher.
Small Cap vs Mid Cap vs Large Cap
Since the end of February—the last month Small Caps were under the historical 3.5% valuation premium—the Russell 2000 has outperformed the S&P 500: +16% versus +8%, respectively.
Earnings Momentum
The second month of Q2 earnings gives us an Up/Down Ratio of 2.08. This is the highest “two-month” reading of the current tax-reform-juiced-earnings era but a bit of a disappointment given our “one-month” figure.
Earnings Momentum
As we digest the first round of Q2 earnings reports, our Up/Down Ratio sports another outrageous reading of 3.67. If you need a chart to make a case for peak earnings growth, here you go.
Small Cap vs Mid Cap vs Large Cap
The recent run up in Small Cap stocks, coupled with a less rosy (though still fantastic) trailing earnings profile, has given us the largest Small Cap premium we’ve seen in three years.
Growth vs Value vs Cyclicals
Our Royal Blue Low P/E Tier finally outperformed the High P/E Tier for the first time since November. YTD, Value stocks still lag Growth in all market cap tiers.
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