Tackle Today: Small-Cap vs. Large-Cap stocks
May 19, 2022
«Size matters.»
Traders,
Smaller companies carry more risk but offer more reward. Their higher beta has been on full display during the bear market. While the S&P 500 is less than 20% off the highs, the Russell 2000 is down nearly 30%. What’s more, the Russell topped before the S&P and led us into bear country.
But here’s the thing. Historically, small caps lead us out of bear markets by rebounding the most. That makes them an exciting area to focus on once the beatdown is over.
Many times bear markets are synonymous with recessions. In other words, the worst market declines occurred when the economy was contracting. But what happens after the recession is the key takeaway for me. As the chart of the day shows, small caps have outperformed large caps by a wide margin following the last nine recessions. Time will tell if we’re actually entering a recession, but the stock market is certainly acting like it. Keep an eye on small caps when the tide finally turns.
Video of the Day: What is Market Cap
Market capitalization is the total dollar market value of a company’s outstanding shares. Commonly referred to as market cap, it is calculated by multiplying a company’s current market price by the total number of shares outstanding. Investors use this figure to determine a company’s size, as opposed to other metrics using sales or total asset figures.
Chart of the Day: Small-Cap Stocks Outperform Following Recessions
One-year returns following the end of the last nine recessions.
Today’s line up
Traders Lounge 11 AM EST
Join the coaches in this live lounge, ask questions, discuss ideas or just sit back and listen to veteran traders discuss market conditions.
Cashflow Club 8:30 PM EST
Held every Thursday before Friday’s option contract expirations, this show helps you perfect your favorite cashflow strategies.
Cash Flow Condors MasterMind Group 9:30 PM EST
The Condors for Cash Flow system is a high probability option selling strategy designed to generate passive income over time. Join us tonight to go over next month’s orders.
Halftime Report 12:30 PM EST
The Halftime Report starts at 12:30 EST and covers what news is driving the market, chart analysis from the movers and shakers of the day, and fun in a way that only Matt and Tim can deliver.
Trading Justice 476: Interview with Pete Thomas
In this edition of the Podcast, Matt welcomes Pete Thomas of Zaner Precious Metals to the show to discuss all things precious metals.
- Why is gold not catching a bid?
- Is there a buying opportunity coming in at the lows?
Pete and Matt answer these questions and more in episode 476!
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