Posted by:
Comments:
Post Date:
Table of Contents
Equities Pull Back Amid Broader Rotation to Small Caps
Equity markets broadly pulled back for the week. Global equities (represented by the MSCI All Country World Index) were down -2.12%, while domestic stocks (represented by the S&P 500 Index) were down -1.95%.
Shift From Large Cap to Small Cap
The big rotation in markets was a shift away from large cap growth companies to small cap equities. For the week, US small cap (measured by the Russell 2000 index) outperformed US large cap equities by over 3.6%. This is a continuation of a rotation that started the prior week.
Below is a great representation of underlying data pushing equity markets higher. As we move forward, earnings growth is projected to remain strong in both US large cap (blue) and small cap (purple) companies. Additionally, we should start to see growth pushed higher through small cap names after a very strong dominance in big US companies (especially big tech).
Retail Sales
Even though the monthly retail sales report came in flat month-over-month, it beat expectations for a decline. On the other hand, initial unemployment claims rose to 243k in a sign that the labor market may be easing.
Looking Forward
Investors should be on the lookout for Q2 GDP figures to be released on Thursday this week. Expectations are for another strong quarter of growth above 2% year-over-year.
I’d like to leave you with the final line we’ve used since we started these commentaries back at the very height of market volatility in March 2020. Always remember that we create financial/investment plans not for the easy times, but to prepare for the tough ones.
Financial planning and Investment advisory services offered through Diversified, LLC. Diversified is a registered investment adviser, and the registration of an investment adviser does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the SEC. A copy of Diversified’s current written disclosure brochure which discusses, among other things, the firm’s business practices, services and fees, is available through the SEC’s website at: www.adviserinfo.sec.gov. Diversified, LLC does not provide tax advice and should not be relied upon for purposes of filing taxes, estimating tax liabilities or avoiding any tax or penalty imposed by law. The information provided by Diversified, LLC should not be a substitute for consulting a qualified tax advisor, accountant, or other professional concerning the application of tax law or an individual tax situation. Nothing provided on this site constitutes tax advice. Individuals should seek the advice of their own tax advisor for specific information regarding tax consequences of investments. Investments in securities entail risk and are not suitable for all investors. This site is not a recommendation nor an offer to sell (or solicitation of an offer to buy) securities in the United States or in any other jurisdiction.