U.S. small-cap stocks have enjoyed a powerful rally since the beginning of July. The Russell 2000 index of smaller stocks was up 10.4 per cent between June 30 and Friday, while the big-cap S&P 500 index was actually down a fraction. The returns year-to-date still favour big-cap stocks with a gain of 14 per cent versus 11.5 per cent, but the recent reversal has strategists wondering if this is sustainable or a short-term aberration.
per cent as of June 30. They are followed by energy at 18 per cent, industrials at 14 per cent and materials at 12.1 per cent There aren’t many small-cap banks, so you won’t be surprised to learn that the S&P/TSX SmallCap Index has only a 6.5 per cent weighting in this sector. The dominant categories for this index are materials at 32 per cent, energy at 22 per cent and industrial at 12 per cent.
You could argue that if investors are moving into economic sectors dominated by smaller companies that this is expressing a preference for small-cap stocks. But when most investors hear about small-cap investing, they think of moving down the market-cap spectrum within the same industry group and not switching to an entirely different economic sector.