“You’re killing me, Smalls!” Ham Porter to Scotty Smalls in The Sandlot
We made it to fall! The weather should start to get cooler, the days are shorter, the leaves change, and football is in the air. Well, as a Cincinnati Bengals fan our season is over, but for the rest of you, there is always a reason to be optimistic this time of year!
Speaking of optimistic, small caps finally made their first new high since November 2021 That’s right, after nearly four years the Rusell 2000 finally hit a new all-time high. Many, many times the past few years I’ve said that this overall bull market isn’t going to end until we start to see new highs from areas like small caps, midcaps, and transports. I want to be clear, I still think we are in a bull market, but to see more new highs is a great sign.
While this market continues to be led by technology-oriented large cap stocks, we think that small cap stocks making a new all-time high provide some nice confirmation of the broad market trend. Yes, large caps have been leading and that leadership has been concentrated, but broad participation in market gains matters, and we’ve been seeing that not only in small caps, but also international stocks this year. That tells us that should those big tech names falter, there are other areas of the market that can take up the torch.
Here’s a nice chart from The Bespoke Investment Group that shows this was the second longest wait ever for a new all-time high for the Rusell 2000.
Another cool chart that caught my attention was last Thursday saw the Dow, S&P 500, Nasdaq, and Rusell 2000 all hit a new high on the same day, again for the first time since November 2021.
So what happens after long waits in between new all-time highs for small caps? We found 11 times there was more than a year between new highs and the good news is continued strength is perfectly normal after that initial new high. The small cap index was higher a month later 10 out of 11 times and up nearly 8% on average three months later, suggesting near-term strength is likely.
Here’s the same data, but in chart form.
Thanks as always for reading and for more of our thoughts on the latest market happenings, be sure to watch our latest Facts vs Feelings, as we were joined by Dr. David Kelly, Chief Investment Strategist at JPMorgan Asset Management. Dr. Kelly is a true titan in our industry and we learned so much from him.
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