U.S. Russell 2000 index
FTSE AIM ALL share index
There has been a big difference in the performance of big cap and small cap stocks this year with the Russell 2000 index down 3.5% year to date (after gaining 37% in 2013) and the FTSE AIM All share index down around 14%. Some commentators are saying that the falls in small caps mirrors their rise in the early years of the bull market after the 2008/2009 financial meltdown and it is an indication that the spectacular gains of the last 5 years may be coming to an end as investors become more risk averse. Certainly the higher risk nature of small cap shares both in the UK and US seems to have scared off some of the institutional shareholders who have ploughed money into larger caps particularly in the technology sector in recent months. A sell off in small cap shares has often been seen as a signal of more troubled times ahead in the wider market.
With commodity prices very weak right now caused by a strong US dollar and weak demand and emerging market stocks being hit by the threat of rising US interest rates in 2015, small caps are coming along for the bearish ride. Safety first seems to be the thinking, especially as some of the technical indicators for the market aren’t that promising.
With the third quarter US earnings season kicking off in the next few weeks and the actions of the central banks firmly in focus its going to be a fascinating final quarter of 2014. The big sell off in the US market last night, the worst since July, may point to more volatility ahead and extreme variation between different sectors. Just look at miners, energy stocks and retailers in the UK market and how they have under performed and the question is whether a wider array of sectors will be swept up in the sell off. For example, technology looks pricey right now and the top priced Alibaba IPO may indeed point to a market top in this area.
Contrarian Investor UK
IMPORTANT: The posts I make are in no way meant as investment suggestions or recommendations to any visitors to the site. They are simply my views, personal reflections and analysis on the markets. Anyone who wishes to spread bet or buy stocks should rely on their own due diligence and common sense before placing any spread trade.
by contrarianuk
Small cap performance lags larger companies this year – reason for concern?
Sep 26, 2014 at 10:10 am in Market Commentary by contrarianuk
U.S. Russell 2000 index
FTSE AIM ALL share index
There has been a big difference in the performance of big cap and small cap stocks this year with the Russell 2000 index down 3.5% year to date (after gaining 37% in 2013) and the FTSE AIM All share index down around 14%. Some commentators are saying that the falls in small caps mirrors their rise in the early years of the bull market after the 2008/2009 financial meltdown and it is an indication that the spectacular gains of the last 5 years may be coming to an end as investors become more risk averse. Certainly the higher risk nature of small cap shares both in the UK and US seems to have scared off some of the institutional shareholders who have ploughed money into larger caps particularly in the technology sector in recent months. A sell off in small cap shares has often been seen as a signal of more troubled times ahead in the wider market.
With commodity prices very weak right now caused by a strong US dollar and weak demand and emerging market stocks being hit by the threat of rising US interest rates in 2015, small caps are coming along for the bearish ride. Safety first seems to be the thinking, especially as some of the technical indicators for the market aren’t that promising.
With the third quarter US earnings season kicking off in the next few weeks and the actions of the central banks firmly in focus its going to be a fascinating final quarter of 2014. The big sell off in the US market last night, the worst since July, may point to more volatility ahead and extreme variation between different sectors. Just look at miners, energy stocks and retailers in the UK market and how they have under performed and the question is whether a wider array of sectors will be swept up in the sell off. For example, technology looks pricey right now and the top priced Alibaba IPO may indeed point to a market top in this area.
Contrarian Investor UK
IMPORTANT: The posts I make are in no way meant as investment suggestions or recommendations to any visitors to the site. They are simply my views, personal reflections and analysis on the markets. Anyone who wishes to spread bet or buy stocks should rely on their own due diligence and common sense before placing any spread trade.