In the above chart, 43 years of daily data for the Russell 2000 index of smaller companies are divided by the Russell 1000 index of largest companies, and then compressed into a single year to show an idealized yearly pattern. When the graph is descending, large caps are outperforming smaller companies; when the graph is rising, smaller companies are moving up faster than their larger brethren. Small-caps have historically peaked versus large-caps in late-May to early June and tend to underperform until sometime in the fourth quarter.
Compared to S&P 500 or Russell 1000, the Russell 2000 has modestly underperformed this year. As of Friday, July 15 close Russell 2000 was down 22.31% year-to-date compared to –18.95% for S&P 500 and –19.93% by Russell 1000. Despite declining less today, Russell 2000 is likely to continue to underperform through the remainder of the third quarter before reversing course sometime in Q4.
Image and article originally from jeffhirsch.tumblr.com. Read the original article here.