Market Pulse: This Chart Highlights the Sharp Swing Toward Small Caps


    Many people probably know by now there’s been a powerful shift toward small-caps/value stocks and away from big-cap technology.

    This chart highlights the divergence. It has the iShares Russell 2000 ETF (IWM) on top and the Invesco QQQ Trust (QQQ) on the bottom. Between is a relative-strength chart comparing the two.

    The current period resembles late 2016, another election year. This isn’t a surprise because investors look for politicians to spend money and/or cut taxes. That’s more positive for cyclicals like small caps, industrials and financials. The last time around, IWM’s outperformance lasted until the first week of December 2016. A major breakout in the Nasdaq-100 and big technology stocks followed.

    This year is obviously very different because of coronavirus and the political situation. We just wanted to share a chart to put things in perspective.

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