U.S. Equities Ignore World Tension, Rising Oil Prices: Investors Need to Remain Cautious

Includes: IWB, IWM, IWR
by: MyPlanIQ

Conventional wisdom would hold that US Equities would have dropped over the last week based on the continuing tension in Libya. However, that has not proven to be the case. There trend of increasing risk appetite continues as the MidCap stocks are replaced with SmallCap stocks..

Over the past few weeks we have seen Growth leading Blend leading Value. We also see SmallCap leading MidCap leading LargeCap. There was no move out of these top ETFs and continuing moves towards the SmallCap as the SmallCap blend closes in on MidCap Growth.

Assets Class Symbols 03/02
Russell Smallcap Growth IWO 14.83% 14.5% ^
Russell Midcap Growth IWP 13.33% 13.19% ^
Russell Smallcap Index IWM 13.29% 12.9% ^
Russell Smallcap Value IWN 12.43% 12.08% ^
Russell Midcap Index IWR 11.98% 12.37% v
Russell Midcap Value IWS 11.56% 12.32% v
Russell Largecap Growth IWF 10.61% 10.96% v
Russell Largecap Index IWB 9.94% 10.46% v
Russell Largecap Value IWD 9.94% 10.77% v
The trend score is defined as the average of 1,4,13,26 and 52 week total returns (including dividend reinvested).

With Shiller, Buffet and Hussman all pointing to a degree of equities being overvalued, there is need for caution. There is a belief that the government will continue to support the recovery but we have not yet seen the measures needed to manage the debt really. While there is continued appetite for risk, and there clearly is, and with continued government backing, US Equities are likely to favor the smaller growth stocks. If you are just in Large Cap stocks, you are missing out on some of the growth and moving into the MidCap or SmallCap equities makes sense.

For those who are heavily invested in US Equities, it is important to have other asset classes such as real estate and commodities as a hedge against likely corrections.

Disclosure: MyPlanIQ does not have any business relationship with the company or companies mentioned in this article. It does not set up their retirement plans. The performance data of portfolios mentioned above are obtained through historical simulation and are hypothetical.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.