Stock Market Internals Earnings Momentum, Small/Mid/Large Caps, Growth/Value/Cyclicals, and Additional Factors
Additional Factors
The eighth consecutive month of gains for the S&P 500 was made possible by some unlikely heroes.
Earnings Momentum
The Up/Down Ratio sports a lofty reading of 2.08—the best “one-month” measurement since January of 2015. We’ve seen this movie before—strong initial readings have fallen apart in each of the last four quarters.
Small Cap vs Mid Cap vs Large Cap
This is the first time this year we’ve spent two consecutive months above the long-term median Small Cap premium of 3%.
Growth vs Value vs Cyclicals
Growth stocks more than made up ground lost to Value in September. Dividing stocks by market cap, Growth segments are leading Value by spreads of 10-15% YTD.
Additional Factors
The S&P 500, showing little concern for valuations or the political climate, had its best month of performance since February.
Earnings Momentum
The Up/Down Ratio sports a final reading of 1.44. The soft earnings comparison window, running from Q1 2015 to Q2 2016, is no more.
Small Cap vs Mid Cap vs Large Cap
On the back of robust Small Cap performance, our Ratio of Ratios spiked through both the Small Cap discount zone and the long-term median premium.
Growth vs Value vs Cyclicals
Outperformance in Financial and Energy stocks helped Value find its legs in September. For Q3, however, Growth still beat Value in all three segments.
Additional Factors
Thumbing its nose at the laws of thermodynamics, the S&P 500 notched its eighth consecutive quarterly gain. Over these two years, the index is up 37%.
Earnings Momentum
The Up/Down Ratio sports a reading of 1.44. Continuing the pattern of the previous two quarters, an above average “one-month” figure has been followed up with a below average “two-month” reading.
Small Cap vs Mid Cap vs Large Cap
Small Caps are now selling at a 1% valuation discount to Large Caps. Underperformance from Small Caps have kept their valuations in check.
Growth vs Value vs Cyclicals
Growth stocks outperformed for the seventh time out of the eight months of 2017. Small Cap Value, the biggest winner of 2016, has fallen back into negative territory YTD.
Additional Factors
Like a hard-partying college student with a term paper due, the S&P 500 crammed in five positive sessions to end August—just enough to extend its monthly win streak to five. Weakness in the Equal Weighted Average, and awful performance in the lower quintiles, took all the shine off this victory.
Earnings Momentum
For the first month of Q2 2017 earnings, the Up/Down Ratio sports an above average reading of 1.95. But, we’ve seen this movie before—the two previous quarters started with similar results, only to end poorly.
Small Cap vs Mid Cap vs Large Cap
Small Caps are now selling at a 2% valuation discount to Large Caps. It should be noted that this is only the tenth Small Cap discount observation since 2005.
Growth vs Value vs Cyclicals
After a brief siesta in June, Growth got back to dominating Value in July. Our Tech-heavy Royal Blue High P/E Tier is now up 18.4% YTD, and its median P/E just passed 31x.
Additional Factors
The broken record of ‘easy market returns and no market volatility’ plays on. In the nine months since the election, we’ve had eight monthly S&P 500 gains, and a price return of +15.5%. Some large “old economy” stocks helped the Cap Weighted measure outperform in July. Thus far in 2017, the Cap Weighted measure has outpaced the Equal Weighted Average in six of the seven months.
Earnings Momentum
The final Up/Down Ratio of Q1 shows a reading of 1.47. This is the highest figure we’ve seen in the past two years but it remains stubbornly below the long-term average of 1.50.
Small And Large Are Even-Steven
The Small Cap P/E premium has been whittled away YTD, from 8% down to zero, as both tiers now sport a trailing P/E of 21.7x.
Value Has A Moment In The Sun
Value led in all market cap segments during June, but for Q2 overall, Value was left in the dust. Continued momentum extended Growths’ YTD leads—especially in Small Caps.
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