When was the last time Small-caps were not a mess? At least a year now right?
The bearish argument has been that small-caps (and others) are underperforming the large-cap stocks and therefore, the divergence is a warning signal that the market is about to fall apart. Along the way, I’ve asked the question,
What if we get rotation into small-caps rather than the rotation out of large-caps that you keep promising me?”
In other words, instead of the last ones finally falling, what if the stocks down in the dumps get their act together and start playing catch-up?
What does the market look like in that scenario?
Well, I’m still in the camp that we see the latter, rotation into small-caps, not the former where the S&P500 crashes and we go into recession. Here are small-caps relative to large-caps. If we are going to start to see outperformance from the little guys, this would certainly be a logical place for it to start: [Read more…]