Stock Market Internals Earnings Momentum, Small/Mid/Large Caps, Growth/Value/Cyclicals, and Additional Factors
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.
S&P 500: That Makes Seven In A Row
The S&P 500 hasn’t seen a down quarter since the summer of 2015. Since then, a series of seven gradual quarterly gains have produced a 26% gain. As Big Tech had a rare misstep in June, large banks carried the load for another small monthly gain in the index.
Earnings Momentum
The two-month Up/Down Ratio for Q1 results shows a reading of 1.48. Like the quarter before, an excellent “one-month” figure has been dragged down by a second month’s results.
Small Cap vs Mid Cap vs Large Cap
As the numerator of our numerator shrank, the Ratio of Ratios made its way into “Small Cap Discount” territory for the first time in seven months.
Growth vs Value vs Cyclicals
Value’s 2016 outperformance gap has been erased in the Large Cap space; Small Cap Value stocks slipped back into negative territory for YTD 2017.
Additional Factors
So much for that 2,400 resistance level. The S&P 500 plowed through its March 1st high as we closed out May and started June. Valuations, terrorist attacks, and a cloudier political climate are continually being shrugged off.
Earnings Momentum
We start 2017 with a robust reading of 1.91. With the painful memory of last quarter’s fast start and terrible finish still fresh in mind, we won’t be celebrating prematurely.
Small Cap vs Mid Cap vs Large Cap
We can say, with confidence, that although the relative P/E relationship sits at its long-term average (3% Small Cap premium), the absolute P/E ratios of both tiers are terribly high.
Growth vs Value vs Cyclicals
2017 is shaping up to be a Growth story. Our Royal Blue High P/E Tier is outperforming the Low Tier by a spread of 10% only four months into the year.
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