Stock Market Internals Earnings Momentum, Small/Mid/Large Caps, Growth/Value/Cyclicals, and Additional Factors

Mr. Market bumped his head for the first time in quite awhile. After a streak of five consecutive months with new all-time closing highs, the S&P 500 failed to break through the March 1st highs during the month of April.

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The Up/Down Ratio sports a final “three-month” reading of 1.33 for Q4. The steady progress seen throughout 2016 came to a halt with the last two months of Q4 results—a disappointment, indeed.

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Our Ratio of Ratios has bounced between premium and discount for Small Cap stocks the last few months. Keep in mind that both the S&P 500 and the S&P 600 made new multi-year LTM P/E ratio highs in March.

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Growth stocks, which took a relative pummeling in 2016, beat Value all three months of the first quarter. Small Cap Value stocks are the only segment still in negative territory YTD.

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Not a lot of month-over-month action for the S&P 500. But, on March 21st, the index finished down 1.24% putting an end to a run of 110 trading days without a decline greater than 1%—the longest such stretch in 22 years.

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Looking back at January’s robust “one-month” figure (2.07), the current result is disappointing. It was towering 13% above the long-term “one-month” average in January and now sits looking up at the historical “two-month” mean.

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After a 2016 year-end spike, our Ratio of Ratios has settled down below its 3% long-term median premium. Large Caps have experienced additional numerator expansion in 2017, with the S&P 500 up 6% versus the Russell 2000 2.3% gain.

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Large Cap Growth is now the best performing segment YTD. After a red-hot 2016, Small Cap Value has gone nowhere in 2017.

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The S&P 500 had a very relaxing and enjoyable February in the Keys. Aside from a regrettable lower-back tattoo, the index basked in a combination of easy gains, virtually no significant down days, and historically low volatility.

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Building on the momentum of the past few quarters, our “one-month” Q4 ratio sits comfortably above its historical mean for the first time in seven quarters.

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After spiking higher in December, our Ratio of Ratios settled closer to its long-term average in January (thanks, in part, to relative underperformance in the Small Cap space).

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Growth stocks scored a modest win over Value in January. This broke impressive streaks of Value domination—Growth’s last win in the Mid Cap space was last June.

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As we get further into the era of Trump, it will be interesting to see how the market balances anti-immigration and anti-free trade policies with deregulation and tax reform.

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We had the best figures of the past seven quarters and put some downright awful numbers farther in the rearview mirror.

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After spending the first ten months of 2016 under the long-term median premium of 3%, our Ratio of Ratios has bounced hard the past two months.

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Value stocks reversed long established underperformance to Growth in 2016. However, valuations for these “Value” stocks may have gotten ahead of themselves.

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Let’s think back to February of 2016. Oil was in the high $20’s, people were grappling with the concept of negative interest rates, and banks, especially in Europe, seemed vulnerable once again. Energy, Financials, and Industrials stocks turned a scary start into a respectable year.

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Our “two-month” Up/Down Ratio for Q3 tallies up to 1.37. This is the strongest “two-month” reading of the past seven quarters.

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Robust Small Cap outperformance in November pushed our Ratio of Ratios back to its long-term median—a 3% Small Cap premium.

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Thanks to the November surge in Financials and Energy, Value stocks substantially widened their 2016 performance lead over Growth. This has pushed our L3000 median valuation for Small Cap Value stocks to levels not seen since the late 1990s.

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