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The selloff has served to amplify secular style-trends that were in place going into this debacle. Large Cap Growth has continued to outperform everything else, with the underperformance of Value stocks accelerating alongside market losses.

Microsoft and Amazon, the #1 and #3 firms by weight, somehow managed to post a positive return for the quarter. The other Tech Titans all posted results better than the overall index—increasing the Top 5 firms’ S&P 500 weight from 16.8% to 19.5% in Q1. This is easily a new record for our 1990-present data set.

The leadership regime has not been overthrown in this downturn. Large Cap Growth stocks (particularly Tech) have held up relatively very well, widening already huge performance gaps with other styles. Total returns since 2017: Royal Blue Growth +58%; Small Cap Value -26%.

In March, the S&P 500 outperformed the Russell 2000 by a shocking 9.4%. Our Ratio of Ratios is now tickling its 40-year lows, last seen during the Tech Bubble.

Our final Up/Down reading for Q4 stands at 1.18. This is the highest “three-month” number for 2019, a year of earnings that never escaped the shadow of 2018. With the 2016-19 earnings cycle over, we now brace for the coming plunge.

March’s mad dash for cash didn’t stop with rates/credit/FX markets. Among equities, there was also a strong preference for cash liquidity. The market rewarded companies that had strong cash positions and punished those without—which explains why traditionally defensive styles actually underperformed.

For the third consecutive month, Health Care and Information Technology remain among the top three rated sectors. Financials dropped from second to fourth and Communication Services took its spot as #2 (up from 5th). Consumer Staples has improved to 6th from the 8th position. Utilities, Materials, and Energy continue to rank at the bottom.

During the peak-to-trough market drawdown through mid-March, some of the most popular Low/Min Vol ETFs did not perform as anticipated. Stable and boring businesses, that weather downturns relatively well, are facing atypical vulnerabilities.

In recent weeks, we’ve seen the “sell-side” investment community get about as cautious as it ever gets, recommending investors to “trim risky holdings on ‘up’ days” and “stay diversified.” However, these cheerleaders’ idea of diversification is usually to hold more equities in different sizes and styles.

For those who must remain fully invested, an interesting (if not sickening) feature of the bear market is that those who entered it loaded with the most expensive and “trendiest” stocks and sectors have lost the least.

A composite measure of Mid Caps and Small Caps are at bottom-decile valuations relative to their 26-year histories. From a shorter-term viewpoint, though, we find it scary that valuations are so low just a single month into the recession.

We were fooled on Small Caps, and it’s been a “multi-factor” catastrophe.

NASDAQ was the superstar of the bull market yet, ironically, it was a NASDAQ breadth measure that periodically signaled that all was not well beneath the market’s surface.

We have a hard time accepting that the excesses associated with an eleven-year bull market and expansion can be fully expunged in 27 trading days, no matter how ugly those days were… keep some powder dry!

The bull case for a “brief” pandemic-related recession and powerful recovery is the same as the bull case from two months ago for “no recession or bear market” at all: stimulus (as if that’s exactly what the U.S. economy has lacked for the last 11 years).

One of the first cautionary signals to emerge during the market’s two-year topping process was the failure of spreads on low grade corporate bonds to return to their early-2018 cycle “tights,” despite last year’s surge to new stock market highs.

We rolled our eyes when Barron’s and others proclaimed a “new bull market” after a three-day, 21% surge off the March low. That incredible bounce is much more likely to be the first of at least a few bear market rallies.

From now ’til eternity, bullish market pundits will always be able to argue that the global spread of the coronavirus “caused” the current global recession and bear market. While the pandemic was certainly the final catalyst, these pages had been detailing the emerging cracks for over a year.

The bull market of 2009-2020 is no longer. But its spirit—its leadership—has somehow lingered, right through the worst of the decline and during the eleven-day, +19% S&P 500 bounce that followed.

Read this week's Major Trend.