Stock Market Internals Earnings Momentum, Small/Mid/Large Caps, Growth/Value/Cyclicals, and Additional Factors
Growth Leads In Mid And Small Caps But Lags In Large Caps
Growth’s longer term trend of leadership over Value has only been apparent in Large Caps, but this segment had a big short-term reversal in Q2 and July.
S&P 500: Equal Weighted Outperforms During July
The Equal Weighted S&P 500 (+5.4%) outperformed the Cap Weighted S&P 500 (+4.9%) and also continues to outperform on a YTD basis.
Dissecting The Capital Tier Indices
Consumer Discretionary’s weight increased the most in the S&P 500, rising 0.5%. Health Care rose the most in Mid Caps (+0.3%), while Information Technology rose the most in Small Caps (+0.7%).
Growth Leads In Mid And Small Caps In Q2 But Lags In Large Caps
Growth leadership over Value has only been apparent in Large Caps, but this segment had a big short-term reversal in Q2.
Q1 Median Company Earnings: Growth Rates Positive But Below Past Quarters
Sequential growth rates are all down this earnings season, but Micro Caps have been hit particularly hard exhibiting zero bottom-line growth.
Dissecting The Capital Tier Indices
Information Technology sector weight declined across all market tiers, including a 0.4% drop within the S&P 500. However, it remains the largest sector weighting among Large Caps. Financials remain the heaviest weight for both Mid and Small Caps.
S&P 500: Equal Weighted Outperforms During June
The Equal Weighted S&P 500 (-1.3%) slightly outperformed the Cap Weighted S&P 500 (-1.5%) and continues to outperform YTD.
Small Caps Outperform In June
Large Caps lost 1.3% in June, lagging Small Caps (-0.5%). Both fared better than Mid Caps (-1.9%). YTD, Small Caps are now ahead of the other two subsets.
Small Cap Premium Raised By Outperformance
Small Caps are selling at a 15% valuation premium relative to Large Caps, using non-normalized trailing operating earnings. This is slightly higher than last month’s reading of 14%. Using estimated 2013 operating earnings, Small Caps are selling at a higher valuation premium of 25% (22% last month).
Q1 Median Revenue Comparisons: Slowdown For All Cap Tiers
Q1 relative to Q4 growth rates deteriorated across all capitalization tiers indicating a broad based top-line slowdown. Mega Caps delivered zero median top-line revenue growth in Q1.
Up/Down Earnings: Q1 Reports Come In Significantly Below Average
Results look even weaker than those indicated by the first two months of the quarter’s readings. The Q1 ratio of 1.15 is well below the historical average of 1.53, and the lowest reading since Q3 2009.
Q1 Median Company Earnings Growth Rates Positive, But Below Previous Quarters
Sequential growth rates are all down this earnings season, but Large Caps are weathering the storm better than their Small Cap counterparts.
Q1 Median Revenue Comparisons: Slowdown For All Cap Tiers
Q1 relative to Q4 growth rates deteriorated across all capitalization tiers indicating a broad based top-line slowdown. Mega Caps have shown the lowest rate of revenue growth at –0.9%.
Growth Stays Cheap Relative To Value
Growth stocks are still undervalued compared to their own history. Royal Blue Growth is less undervalued than the other Growth segments, and it is closing in on its historical average valuation. Value stocks are all overvalued (but less so in the Small Cap subset).
Small Caps Outperform In May
But Mid Caps are slightly outperforming YTD at +16.7%, though Small Caps (+16.5%) and Large Caps (+15.4%) are not far behind.
Growth Wins In Mid And Small Caps But Lags In Large Caps
Large Cap Value outperformed Large Growth by over 400 bps in May.
Small Cap Premium Rises As Small Caps Outperform In May
Small Caps are selling at a 14% valuation premium relative to Large Caps, using non-normalized trailing operating earnings (8% last month). Using estimated 2013 operating earnings, Small Caps are selling at a higher valuation premium of 22% (16% last month).
Dissecting The Capital Tier Indices—Majority Of P/E Ratios Rise
These tables identify and compare important characteristics of the broad sectors of the S&P 500, along with the S&P Mid Cap and Small Cap indices.
S&P 500: Equal Weighted Outperforms During May
The Equal Weighted index also outperforming YTD.
Up/Down Earnings Ratio: Q1 Reports Are Tracking Significantly Below Average
With two months of Q1 earnings reports in, results are very weak with a reading of 1.16, well below the historical average of 1.57. This is the lowest two-month reading we’ve seen since Q4 2009.
Perception for the Professional
March 2026 Issue
Featured Articles
Sector Navigator
March 2026 Issue
