Stock Market Internals Earnings Momentum, Small/Mid/Large Caps, Growth/Value/Cyclicals, and Additional Factors
Additional Factors
The index, still a bit shy of its all-time closing high, did set a new total return high on July 25th—six months after the trouble began in January. The FAANG stocks had some divergent components in July but still provided a big boost for the S&P 500.
Earnings Momentum
Wrapping up Q1 reporting, our Up/Down Ratio is flying high at 2.00. This is the highest “three-month” figure since 1996, even besting those readings immediately following the Great Recession.
Small Cap vs Mid Cap vs Large Cap
Our Ratio of Ratios has been stuck in the Small Cap premium range of 2% to 7% for the last ten months—limiting the ability to make a call on market cap preference with this vignette.
Growth vs Value vs Cyclicals
Growth stocks maintained their dominance over Value in Q2. This outperformance has finally leveled relative historical valuations between Value and Growth.
Additional Factors
Small Caps zoomed ahead of Large Caps the last four months. Couple this with the top-25 largest S&P 500 firms still charging higher and we have a very interesting “barbelled” performance profile.
Earnings Momentum
After Q1’s record breaking “one-month” figure, our “two-month” reading could only disappoint. Still, May’s Up/Down Ratio of 2.01 is one of the highest “two-month” figures in 35 years of observations.
Up/Down Earnings: A Little Shrinkage
Small Cap vs Mid Cap vs Large Cap
Other than an initial bump in the Small Cap premium in March, Small Caps’ last three months’ outperformance hasn’t manifested itself in this vignette.
Growth vs Value vs Cyclicals
Growth’s year-and-a-half dominance over Value continues to roll on. Growth’s substantial gains have almost erased Value’s long-standing relative valuation premium.
Additional Factors
Like a thirty-year-old still living with his parents, the market doesn’t seem to have much direction. Since 1950, the median recovery time (if the market does indeed recover) from an intermediate correction is just 33 trading days. We’re now going on 80 trading days since the low set on February 8th… tick tock.
Earnings Momentum
Our first Up/Down Ratio based on 2018 earnings sports a mind-blowing reading of 3.22—the highest “one-month” figure in 35 years of data.
Small Cap vs Mid Cap vs Large Cap
This observation falls neatly in the middle of our 2% to 7% Small Cap premium range we’ve observed over the last eight months—providing no real “call” for this vignette.
Growth vs Value vs Cyclicals
Beaten-up Small and Mid Cap Value stocks performed the best during April. In the Mega Cap space, however, Growth continued to outperform.
Additional Factors
Compared to the first three months of 2018, April turned out to be a bit of a snoozer for the S&P 500. One corner of the index did have a little excitement—Energy stocks. Yes, Energy stocks. The beaten- down, shriveled up sector had its best monthly performance in three years (+9.4%).
Earnings Momentum
Our Up/Down Ratio sports a towering reading of 1.79, which is the highest our “three-month” ratio has been since the exit of the Great Recession.
Small Cap vs Mid Cap vs Large Cap
Small Cap outperformance helped boost the Ratio of Ratios up from a 2% premium at the end of February. This is the first month our Large Cap P/E ratio has been below 20x since the end of April 2016.
Growth vs Value vs Cyclicals
Growth has outpaced Value in each market cap tier for five quarters in a row. Our Royal Blue High P/E Tier was the strongest performing segment of Q1 and outperformed the Low P/E Tier by a spread of 6.7%.
Additional Factors
The index had a quarterly loss for the first time since Q3 2015. Volatility—which had been pretty much non-existent for all of 2017—returned and even had the nerve to persist. With mega caps teetering in March, the Equal Weighted Average scored its fourth monthly win in the last year.
Earnings Momentum
Our Up/Down Ratio held on to its first month gains and now sports a “two-month” reading of 1.97. We’re experiencing a quantity of firms growing YOY EPS that is unmatched by recent history.
Small Cap vs Mid Cap vs Large Cap
Despite dramatic Large Cap outperformance over the last five quarters, our Ratio of Ratios hasn’t strayed more than 4% from its long-term median Small Cap premium of 3%.
Growth vs Value vs Cyclicals
Outperforming in up, and now, down months, Growth stocks seem to have the best of both worlds. After an ugly February, Small and Mid Cap Value stocks are now in negative territory YTD.
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