Style-Box Update, Small-Cap and High-Yield, and Sector Returns

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Nothing has really changed yet in terms of “style-box” returns with Growth outpacing Value and Large-Cap beating Small-Cap.

Late in the week of May 222nd, The CFA Society of Chicago held a webinar with Gina Adams of Bloomberg (one of Bloomberg’s Equity Strategists), which was very informative.

One area of interest Gina covered on the call was the small-cap sector’s out-performance attribution tends to be correlated with high-yield credit out-performance.

Readers should look at the above spreadsheet and note that the last time the smallcap asset claess beat large-caps was 2016, which was also a year when corporate high-yield credit spreads bottomed in Q1 ’16 when the price of crude oil bottomed at $28, and then had a pretty good year of returns, with the HYG returning 13.9% (NAV). Value across all market caps performed very well both on a relative and an absolute basis as well.

Though to be fair, high-yield’s (HYG) 2019 return was 14.23%, smallcap’s had a good year, but still fell shy of the large-cap segment.

Sector returns: 

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As readers know, we are big fans of Bespoke, and bespoke has given us some perspective on sector outperformance over the last 90 days.

Readers should note the sector performance since May 13th, the bottom table in the above two charts.

Summary / conclusion: Hopefully readers get some perspective from the style-box update in terms of asset classes within the equity market. Don’t ever forget there is always “the game within the game” which helps me evaluate what’s happening within the overall capital markets, since writing about it keeps me focused on the detail.

Obviously large-cap growth continues to rule the roost from an absolute and relative performance perspective.

I’m keeping an eye on that for clients and am ready to allocate some small-cap exposure when the numbers justify that allocation.

With the performance in corporate high-yield credit since the late March ’20 lows, I’m surprised this hasn’t happened already, or it is starting and it might require more time to evaluate.

Thanks for reading.



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