Sinking Small Caps

Here’s a look at the relative strength of the small-cap sector. This is an interesting sector to watch for a few reasons.

For one, the sector is skewed toward domestic manufacturers. As a result, it’s a good way to see the impact of the U.S. dollar on equities.

Also, small-caps had a long 15-year run of outperforming the market (1999 to 2014). That’s quite impressive. Of course, you don’t know when the cycle is over until after the fact.

I’m sure many investors thought the relative strength line would make a run at its February 2014 high. It hasn’t yet. Instead, the line has gone down, down and down. It really started to crumble after last June. I think it’s safe to say that this is a new cycle of small-cap underperformance.

The little stocks just ain’t popular.

Posted by Eddy Elfenbein on February 9th, 2016 at 11:52 am

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