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.
