While large cap stocks have rebounded quite nicely from the
initial panic over tapering, small caps have actually done even
better as of late. In fact, the small caps, as represented by the
, have added about 3.6% in the past month, compared to a gain of
just under 0.8% for
This extends the recent streak of outperformance by these
pint-sized companies as of late, as
has added about 28.8% in the past year, beating out the 24.1%
posted by the S&P 500 ETF in the same time frame.
Part of the reason for this relative outperformance has to be
the return of the risk on trade lately, but also the focus of
small caps compared to their large cap counterparts. Generally
speaking, small caps tend to do more business in their home
market, and with foreign nations from around the globe facing
sluggish conditions, this may be helping small caps to power
ahead as well.
However, it is worth pointing out that small caps tend to
experience much more volatility than their large cap
counterparts, and that the small caps' outperformance is pretty
much a recent phenomenon. The S&P was holding its own-or even
beating small caps-for much of 2013 before falling by the wayside
once July began.
Given this, the continued outperformance of small caps is by
no means assured, especially if more volatility hits the market.
Still, with the U.S. arguably leading the way for major
economies, pint-sized securities could be the way to go in this
type of environment…
But what do you think?
Will small caps continue to outperform, or will large
caps steal the show back this earnings season?
Let us know in the comments section below!
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