I am becoming increasingly surprised by large cap stock resilience in the current market environment. The fact that the S&P 500 is down just 12.4% year to date, amid an economy in shutdown mode, with a displaced workforce, is a testament to something. I'm just not sure what. Perhaps it's the trillions that the government has pumped in various forms, or maybe the market is discounting this all as a one-time event - "noise" as it were- with no intermediate or longer term affects, and the expectation that states will reopen soon, and everything will go back to "normal". Maybe it's a combination of the two. I am not complaining, mind you, but I am curious, and perhaps a bit concerned.
Meanwhile, smaller companies have not been as fortunate, and while you'd expect there to be a rather large spread in performance between large and small, it is still quite amazing. Year-to-date the Russell 2000 and Russell Microcap Indexes are down 24.4% and 24.6%, respectively, each off by at least 1200 basis points versus the S&P 500, and squarely in bear market territory.
What's most glaring is the performance of value versus growth, The Russell 2000 Value Index and Russell Microcap Value Indexes are down 30.7% and 31%, respectively, year-to-date. The performance gap between the respective growth indexes is wide enough to drive a truck through. Russell 2000 Growth (-17.8% year-to-date) is outperforming R2000 Value by nearly 1300 bps, while Russell Microcap Growth (-16%) is beating RMicro Value by exactly 1500 bps.
However, the drubbing value is taking versus growth is not just happening within small and microcap companies, it is also occurring within large caps. Performance of the Russell 1000 Index, down 12.3% year-to-date, is on par with that of the S&P 500. The R1000 Growth Index is down just 4.1% YTD, while R1000 Value is down nearly 21%, equating to a 1690 bps performance difference.
Putting it all together, consider that large growth (R1000 Growth) is outperforming small value (R2000 Value) by 2660 bps year-to-date. That, to me is stunning.