Small caps’ outperformance this year is a good sign, Paul Hickey says
Paul Hickey, co-founder of Bespoke Investment Group, said the strength of the small-cap stocks is a sign of market resilience despite the uncertainty of the Federal Reserve’s tightening path. The Russell 2000 index is up nearly 8% this year, outperforming the S&P 500's 5.4% gain.
“There was some really strong underlying resiliency in the market in the face of tightening financial conditions,” Hickey said on CNBC’s “Closing Bell Overtime” Monday.
We may see a small correction caused by the coming FED's rate increase, however many investors will consider it as an opportunity to buy at low. Why?
Below you may see the S&P 500 index and historical rates. Current rates are still lower than they were at the bottom of 2000-2003 stock market recession. They have to go up to 3% at least. Only when when we see that FED stops rising rates - only then we may consider the end of the Bull market.
One of an condition for the market dive into a recession is to have high rates when wen investors and corporations run into difficulties with borrowing.
When we compare to the previous week the Breadth sentiment improved on the S&P 500, DJI and NYSE Composite indexes, and it remained unchanged on the Nasdaq 100 and Russell 2000 indexes:
78% of the S&P 500 listed stocks are bullish (moved up over the past week), 93% of the DJI listed stocks are also bullish (moved up over the past week), 75% of the Nasdaq 100 stocks are bullish (stayed unchanged), 65% of the Russell 2000 stocks are bullish (moved up slightly over the past week), 76% of the NYSE Composite index stocks are also bullish (moved up over the past week). Source: http://www.marketvolume.com/quotes/highlowrangechart.asp
based on the Breadth Data the market sentiment remains strongly bullish. On the chart #1 below you may see the S&P 500 Breadth chart. The other indexes (DJI, Russell 2000, NYSE composite and Nasdaq 100) Breadth charts looks similar
Chart #1: S&P 500 index High-low Breadth chart - green line represents bullish stocks and red line represents bearish stocks
Standard and Poor's 500 Index is a capitalization-weighted index of 500 stocks. The index is designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The index was developed with a base level of 10 for the 1941- 43 base period. See SPY US Equity for the tradeable equivalent.