From the desk of Steve Strazza @Sstrazza
Our Top 10 report was just published. In this weekly note, we highlight 10 of the most important charts or themes we're currently seeing in asset classes around the world.
A Big Retest For Small Caps
Since the March lows last year, SMIDs have been the clear leadership group with higher yields as a tailwind. However, this entire relative theme has cooled off as risk assets have consolidated along with interest rates. Considering last year’s major breakdown in Small-Caps relative to Large-Caps signaled lower rates, this is a critical time and place to witness a resolution either way.
From an intermarket perspective, we’ve seen our crucial stock and commodity ratios signal lower rates in the near future. Is this signaling a
relative breakdown in Small-Caps? As always with markets, we need to play the cards we’re dealt. So while the longer-term outlook favors higher yields, we’re paying close attention to this resolution to signal a more immediate directional bias for these relative themes.
