Style Box Update: Small And Mid-Cap Value Outperforming Large-Cap Growth

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Includes: DIA, IJJ, IJK, IJS, IJT, IVE, IVW, IWM, QQQ, SPY, TLT
by: Brian Gilmartin, CFA
Summary

The dramatic 'style" out-performance by large-cap growth since the last correction in Q1 '16 might be coming to an end.

The plan is to keep readers updated usually every 6 weeks at the end of each quarter and then mid-quarter, but the returns aren't always posted in a timely fashion.

With every correction, each ensuing bull market rally is always somewhat different in nature, leadership, etc.

The bounce in the various US equity asset classes since December 24th and December 26th is resulting in the small and mid-cap sectors within the S&P 500 outperforming large-cap and growth for the first time in - well - a while.

If readers would look at the attached spreadsheet, the last time we saw small and mid-cap "value" outperform "growth" was 2016.

Will this last?

It's hard to say.

Summary and conclusion: The dramatic 'style" out-performance by large-cap growth since the last correction in Q1 '16 might be coming to an end. The plan is to keep readers updated usually every 6 weeks at the end of each quarter and then mid-quarter, but the returns aren't always posted in a timely fashion.

Here is the thing though for readers: with every substantial correction in the S&P 500, typically the ensuing rally is always somehow different than the rally prior to the correction. Just look at the Energy sector - the Energy sector was 14-15% of the S&P 500 by market cap as of August 2014 and then the collapse in the price that eventually bottomed in Q1 '16 near $28 per barrel, but Energy's market cap as a percentage of the S&P 500 hasn't gotten anywhere close to that 14-15% weight.

With every correction, each ensuing bull market rally is always somewhat different in nature, leadership, etc.

Small and mid-cap value have been in the penalty box for the last few years. Will they now lead again?

Thanks for reading…

Editor’s Note: The summary bullets for this article were chosen by Seeking Alpha editors.