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Stock Market Internals Earnings Momentum, Small/Mid/Large Caps, Growth/Value/Cyclicals, and Additional Factors

Mar 07 2024

From Abysmal To Awful

  • Mar 7, 2024

Our Up/Down ratio reads 1.06 for the second month of Q4 results. That is a vast improvement from the take-away-your-shoelaces “one-month” reading of 0.66. The current ratio lands toward the bottom of our depressing eight-quarter range of “two-month” figures.

Mar 07 2024

Small Cap vs Mid Cap vs Large Cap

  • Mar 7, 2024

In February, the S&P 500 outperformed the S&P 400 by 2%, helping to widen our Ratio of Ratios by a congruent amount. Currently, the meandering Small Cap discount sits right at both its one- and two-year moving averages.

Mar 07 2024

Growth vs Value vs Cyclicals

  • Mar 7, 2024

Growth continued its fantastic start to the year with Royal Blue Growth +10% YTD. That gain has bolstered the median P/E multiple of this Mega-Cap proxy to 42x—near its contemporary high of 45x recorded at the end of 2021.

Mar 07 2024

Additional Factors

  • Mar 7, 2024

If you happened to be in the business of producing or consuming A.I. chips (NVDA +60%, META +38%) you’ve done very well in 2024 thus far. Also, if one’s business model revolves around the negation of chips—potato or tortilla—this year has been very kind to you (LLY +29%). Those three firms, not necessarily the first names to come to mind to swing the index, have accounted for more than 40% of the S&P 500’s YTD upside.

Feb 07 2024

Earnings Momentum

  • Feb 7, 2024

Our Up/Down ratio reads 0.66—a terrible start to Q4 reports; only five prior “one-month” readings were worse than today’s: Q2-2020 and every quarter of 2009. Despite present day economic conditions seemingly quite a bit different than in those five previous cases, roughly the same percentage of firms are failing to beat EPS of twelve months ago.

Feb 07 2024

Small Cap vs Mid Cap vs Large Cap

  • Feb 7, 2024

After a scorching December for the S&P 600 (+13%), the small cap index underperformed both the Equal- and Cap-Weighted S&P 500 in January. Interest rates—not valuations—seem to be in full control of the situation, as small caps patiently wait for rates to move lower.

Feb 07 2024

Growth vs Value vs Cyclicals

  • Feb 7, 2024

At the end of 2023, market breadth finally widened. That short run came to an end in January as the momentum champ of 2023—Large Cap Growth—was back in control.

Feb 07 2024

Additional Factors

  • Feb 7, 2024

The semiconductor stock is now within spitting distance of becoming the eighth firm ever to enter the prestigious 4% Club (achieving a 4% weight in the S&P 500). Over the last four years, NVDA has posted a return of +945%, pushing its index weight from 0.54% to 3.74%. The stock’s 24% gain in January contributed nearly half of the S&P 500’s +1.6% monthly return.

Jan 06 2024

Earnings Ratio in Depressing Range

  • Jan 6, 2024

With the books closed on Q3-23 reporting, the ratio reads 1.16—right in the middle of the depressing range captured over the past two years. This equal-weighted all-cap vignette is still flashing a warning sign about companies’ ability to grow their bottom lines.

Jan 06 2024

Small Cap vs Mid Cap vs Large Cap

  • Jan 6, 2024

Our preferred earnings measure, five-year normalized EPS, has grown from $145 to $171 over the last two years. The S&P 500’s Normalized P/E multiple has dipped from 32.9x to 27.9x since the end of 2021. Those two figures are good for the 94th and 81st percentiles, respectively, in our 1995-present data set.

Jan 06 2024

Growth vs Value vs Cyclicals

  • Jan 6, 2024

Royal Blue Growth (+40%) led all of our style boxes in 2023. However, this mega-cap proxy still hasn’t recovered all of its losses from 2022.

Jan 06 2024

Additional Factors

  • Jan 6, 2024

The story of the year was the Magnificent 7. Even with a lackluster December, the largest seven firms produced an average return of +111% in 2023. Advances in those companies added $5 trillion in market cap and were responsible for just under two-thirds of the S&P 500’s overall gain.

Dec 06 2023

Everything Looks Late Cycle

  • Dec 6, 2023

Our ratio reads 1.15—a nice bounce from the alarm-ringing “one-month” figure of 0.94 at the end of October. Still, this result is very much in the range of the past seven quarters’ “two-month” readings, which have an abysmal tally of 1.10 on average.

Dec 06 2023

Small Cap vs. Mid Cap vs. Large Cap

  • Dec 6, 2023

November’s rising tide lifted all boats and our Ratio of Ratios is unchanged from the end of October. Absolute trailing P/E values for both Large and Small Caps spiked higher with the market, but remain well below readings seen at similar S&P 500 market levels at the end of July.

Small Cap Discount = 27%

 

Using non-normalized trailing operating earnings, Small Caps are selling at a 27% discount to Large Caps. November’s rising tide lifted all boats and our Ratio of Ratios was unchanged from the end of October. Absolute trailing P/E values, both for Large and Small Caps, spiked higher with the market, but are well below those seen at similar S&P 500 market levels at the end of July—another testament to this vignette’s most suitable benchmarks (Equal Weighted S&P 500 and S&P 600) lagging over that time period. Looking at full-year 2024 numbers, the Small Cap/Large Cap P/E discount is narrower at 23%.

Small Cap Discount = 27%

 

Using non-normalized trailing operating earnings, Small Caps are selling at a 27% discount to Large Caps. November’s rising tide lifted all boats and our Ratio of Ratios was unchanged from the end of October. Absolute trailing P/E values, both for Large and Small Caps, spiked higher with the market, but are well below those seen at similar S&P 500 market levels at the end of July—another testament to this vignette’s most suitable benchmarks (Equal Weighted S&P 500 and S&P 600) lagging over that time period. Looking at full-year 2024 numbers, the Small Cap/Large Cap P/E discount is narrower at 23%.

 

Dec 06 2023

Growth vs. Value vs. Cyclicals

  • Dec 6, 2023

Large- and Mid-Cap Growth were the biggest winners (+12-14%), although all style segments benefited from the stock market upsurge. The advance by MC Value, SC Growth, and SC Value (+9% each) flipped their YTD losses to the positive side of the ledger as of November’s close.

Dec 06 2023

Additional Factors

  • Dec 6, 2023

As we slice and dissect November’s performance, we find comfort in the uniformity of returns for the Cap Weighted measure, Equal Weighted average, and even our market-cap quintiles—which were all up around 9%. That is a stark change from the concentration of returns seen over the last ten months. The Cap Weighted S&P 500 ended November just 1.7% shy (via either price or dividend return) of eclipsing its 23-month-old highwater mark.

Nov 06 2023

An Underwhelming Start

  • Nov 6, 2023

The number of firms beating on both the top and bottom lines has been underwhelming thus far. Those that missed EPS estimates have seen their equity drop an average of 4-5% relative to the index. That’s quite a bit higher than the usual 2-3% decline we’d expect given the history of data.

Nov 06 2023

Small Cap vs. Mid Cap vs. Large Cap

  • Nov 6, 2023

The most appropriate proxies for this comparison, the Equal Weighted S&P 500 and the S&P 600, were down 4.2% and 5.8%, respectively, in October. Hence, the minimal 1% widening for the Small Cap discount makes sense.

Nov 06 2023

Growth vs. Value vs. Cyclicals

  • Nov 6, 2023

Three of our six style boxes are now in negative territory for 2023. The Mega Cap Growth proxy—Royal Blue Growth (+16.4% YTD)—has been the only game in town.

Nov 06 2023

Additional Factors

  • Nov 6, 2023

Another month, another yawning performance gap between the Cap- and Equal-Weighted S&P 500. Since the end of January, the more democratic of the two has underperformed the top-heavy version by nearly 14%. To find a nine-month span with greater relative underperformance for the Equal Weighted Index, you’d have to go all the way back to the very top of the Tech Bubble in March 2000.