When the stock market was rallying earlier this year,
IndexUniverse Analyst Ugo Egbunike noticed the rally rested almost
entirely on the backs of the large-caps. Using Vanguard ETFs, he
showed that the large-caps outperformed their smaller peers by
about 7 percent over the 12 months ending April 2012.
Under normal market conditions, small-caps should outperform
large-caps when the economy is doing well and underperform them
when the economy is doing poorly.
Indeed, small-cap stock performance is generally a good
indicator of economy strength, so the segment's underperformance
earlier this year was troubling.
Recently, however, small-caps have been keeping pace with-and
even outperforming-their large-cap brethren as the stock market has
Over the past month, the Schwab U.S. Small-Cap ETF
(NYSEArca:SCHA) has returned almost double the performance of the
Schwab U.S. Large-Cap ETF (NYSEArca:SCHX), while the Schwab U.S.
Mid-Cap ETF (NYSEArca:SCHM) is in between the two.
Whether the market continues to rally, it's good to see
small-caps acting like small-caps again.
The Fed is meeting in just five days to discuss whether to
further stimulate the U.S. economy-if you're predicting good news,
now might be a very good time to increase your small-cap
At the time this article was written, the author held a
position in SCHA. Contact Carolyn Hill at
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