It’s Game Time for Small Caps
- Posted by JC Parets
- on December 6th, 2012
This is their time to shine. From a seasonality perspective, small-cap stocks historically outperform their larger-cap counterparts over the next six months or so. This so called “January Effect” has become more popular over the years, so the outperformance typically begins in December.
My friend Jeff Hirsch, editor in chief of the Stock Trader’s Almanac, has a great chart over at his blog showing the one year seasonal pattern for the Small-Cap Russell 2000 relative to the Larger-Cap Russell 1000. I think this tells the story nicely:
“The one-year seasonal pattern of the Russell 2000/Russell 1000 has been plotted. Where the graph is falling large caps outperform small caps, when the graph is climbing small caps hold the advantage and outpace large caps. It’s around mid-December, when small-cap stocks really begin to take off. This seasonal strength typically lasts until early June”
According to the Almanac, Small-Cap strength in the last half of December became even more magnified after the ’87 market crash. The performance of the Russell 2000 has been almost twice as good as the Russell 1000 for the period between Dec 15th – Dec 31st since 1987, returning average of 3.5% and 1.8% respectively. From Dec 15th – Feb 15th, the Small-Caps averaged a 5.4% return since 1987, compared to just 2.9% for the Large-Caps. Those numbers are 5.9% compared to just 3.2% if you take it back to 1979.
To me, this data suggests that it generally pays to get a head start on the “January Effect” in mid-December. Interesting stuff…
Full Disclosure: Nothing on this site should ever be considered to be advice, research or an invitation to buy or sell any securities, please see my Terms & Conditions page for a full disclaimer.blog comments powered by Disqus
J.C. Parets is the Founder & President of Eagle Bay Capital, LLC. He earned the Chartered Market Technician designation (CMT) in 2008 and now actively manages money incorporating Technical Analysis and Behavioral Finance into his practice More
- Video: Looking For Investing Opportunities Around the World
- Why America is the Best in the World?
- Webinar: Technical Analysis To Find Profitable Opportunities Around the World
- Was That A Failed Breakout in the US Dollar?
- Radio: Larry Kofsky & JC Parets from NYSE
- This Chart Still Suggests Buying Bonds and Selling Stocks
- Fox Business: US Stocks Are Heading Lower
- S&P500 Breaks the 2009 Uptrend Line
- The Bond Market Still Says: “Sell Stocks”
- Discretionary vs Staples Ratio Breaks 2009 Uptrend Line
Archive by Year