If you’d like to hear more, here’s another five minutes. Now, let’s jump into the details.
: Our Work on the Russell:
We had the pleasure of meeting with a number of Small Cap focused investors last week, who were interested in exploring how the S&P 600 (generally thought of as a higher quality Small Cap benchmark) compares to the R2000 (the index family that most Small Cap active managers benchmark to), particularly in regard to non-earners. The percent of companies with negative EPS is near the high end of its range for the R2000 (39%), but is well below prior peaks for the S&P 600 (16% currently vs. 27%). In the R2000, Health Care and Tech are heavily skewed towards negative earners.
erally use one of the Russell:
We don’t rule out another burst of low quality leadership within Small Cap (i.e., R2000 leadership relative to the S&P 600), but think Small Cap investors should keep a few things in mind. First, though it’s occurred in fits and starts and has been mild in terms of magnitude, the R2000 has technically beaten the S&P 600 since May 2022. The duration in terms of time is similar to the low quality trades seen coming out of the post-Tech bubble normalization period of 2002-early 2004 and the immediate pre- and post-COVID time period of late 2019 to late 2020.
as strongly outperformed the R:
the valuation profiles of the:
rises and has been seen since:
Moving on to Takeaway #2: CFTC Buyside Positioning In US Equity Futures Rebounded Ahead of the Fed
We’ve been highlighting for some time how US equity market sentiment has look stretched on a variety of indicators (AAII net bulls, CFTC buyside positioning in US equity futures, the University of Michigan survey’s questions on the outlook for stock prices, and the Fed Flow of Funds data on US equities as a percent of financial assets). Last week, we highlighted how aggregate buyside positioning in US equity futures on CFTC’s data had started to move lower, driven by declines in S&P 500 and Nasdaq 100 futures contracts. It appeared that the short-term pullback we’ve been looking for in the US equity market for the past months might finally be materializing.
However, in Friday’s update (which pulls in data from the preceding Tuesday’s close), we were surprised to discover that buyside CFTC positioning in US equity futures reversed course and moved up.
Both S&P 500 and Nasdaq 100 positioning popped, though only the former recaptured and surpassed previous highs.
we had been seeing in Russell:
eeting and rapid increases to:
That’s all for now. Thanks for listening. And be sure to reach out to your RBC representative with any questions.
