Trend Shift: Small Caps Sharply Outperformed Market Last Week

I’m a huge data nerd and like to believe that I have an edge on many of my enemies — because I pay close attention to the shifts in the winds of the market. One of the breezes I watch regularly is performance by market cap. For years, large caps have crushed small. Very rarely will small caps, as a whole, beat out the overall market. Last year, when I was investing my Quant based upon market cap performance, the selections never chose market caps under $1b — because they always underperformed.

Last week, all stocks jumped by 1.36%, on average — but stocks under $1b in cap leaped by 1.8%. More uniquely, this outperformance extended all the way down to market caps under $50 million, alluding to a risk on scenario that is wantonly degenerate.

It would be foolish to believe such a trend in risk will end abruptly, since we’re all having so much fun trading now.

I tell you these things now — because I am a generous and charitable man. I realize you don’t delve into small caps — because you’re above it and the ticker symbols you possess are all very distinguished and honorable. I, on the other hand, view these things as nothing more than burning pieces of scrap paper flickering into the gusty wind. Hold them too long, and you’ll get burned.

But it’s so much fun seeing it all unravel and I’ll admit that I love the sense of ruin that stalks me when I’m trading them.