Small cap value moved into the fourth ranked DALI size and style group for the first time since 2014. We highlight this advance and look at historical performance.
Beginners Series Webinar: Join us on Friday, February 26th, at 2 PM (ET) for our NDW Beginners Series Webinar. This week's topic is Using the Dashboard & Account Preferences. Register Here.
It was another large down day for markets, especially for the smaller sizes and high fliers of months past. That said, we wanted to provide a few bullet points to summarize the recent market action:
- The S&P 500 (SPX) fell over 2% on Thursday, reversing down into Os on its 20-point chart to print a lower top after its high at 3940. A move past 3820 would violate an initial level of support, with further levels offered around 3700. SPX still remains well above its bullish support line and holds on to a positive return for the year
- The US Treasury 10YR Yield Index (TNX) crossed above 1.6%, matching levels last seen in February of 2020; 10YR treasury yields are now up over 50% on the year. For a further dive on recent moves in the fixed income markets, see our latest report here.
- The Bullish Percent for the NYSE (BPNYSE) reversed down into Os earlier this week and edged lower today, residing in a column of Os just below 70%. It is still a positive to see this indicator remain in high field position; however, should this push lower it could become a greater warning sign of dwindling market participation. BPNDX also retreated, now residing at the 43% level.
On a different note, we saw small cap value moved into the fourth ranked DALI size and style group for the first time since 2014. Although outpacing mid cap blend by just one relative strength buy signal now, the move further underscores the strength in smaller sizes along with value-oriented areas of the market. Last time small cap value moved into the fourth ranked DALI size and style group it sat there for about 134 days before stalling out; however, as depicted below, most small cap value rallies in the past 15 years were short lived – climbing to the fourth rank to only cool off about a month later (the exception being 2008-2009). While large cap equities have been a dominant force for the better part of the past decade, we did see small cap value demonstrate exceptional leadership in the early 2000s, more specifically January 2003 – July 2007, where the group held the number one rank for 1,222 days (just over three years). This, albeit loosely and on average, aligns with a recent factor study conducted by Russell which empirically demonstrated that size and value have anticipated subsequent inflections in GDP growth, or when the outlook for the economy is favorable (Source: ftserussell.com). Although small cap value has not been able to sustain leadership in the past, market dynamics are constantly changing and it will be interesting to see if this time is any different.
