By Mark Spatt, CFA, Investment Analyst at Cornerstone Investment Partners, sub-advisor of the AdvisorShares Cornerstone Small Cap ETF (NYSE Arca: SCAP)
With the July 4th holiday, there is no additional column this week beyond the small-cap market review. Enjoy the break!
The small cap market, as defined by the Russell 2000 Index, was up 0.1% overall during the week. Unlike the past few weeks, which saw oil prices hit a bear market and yield curves continue to flatten, investors regained confidence in the reflation trade in response to European central bank hawkishness, and rotated out of strong-performing tech and into financials. Energy (+4.0%, as WTI spiked 7% after entering bear territory the week prior), Financials (+2.3%, as the yield curve materially steepened), and Materials (+1.7%) were the strongest sectors in the Index. Information Technology (-2.8%, on shifting sentiment away from tech and towards financials), Utilities (-1.8%), and Health Care (-1.5%, likely due to increased uncertainty regarding Obamacare reform) were the weakest. Overall, small caps outperformed large caps as the Russell 2000 Index returned around 65 basis points more than the Russell 1000 Index (down 0.6%). Among small caps, value outperformed growth for the first time in three weeks, with the Russell 2000 Value Index beating the Russell 2000 Growth Index by 170 basis points, with the reversal of the IT/Financial trade and weakness in Health Care.
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