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I just look at Russell-2000 vs. S&P 500. Pick the time-frame of your choosing... 1999-present, 2007-present, 2012-2022 (past 10 years), 2017-2022 (past 5 years) and so on. Yes, this omits reinvestment of dividends, but dividends would slightly favor the S&P over the Russell.
Big caps dominated in the 2010s but small caps took the prior decade.
To make an accurate comparison we need to use the actual total returns. Looking at 1999-2021, inclusive, small caps did a little better.
-- S&P 500 turned $10,000 into $59,735
-- Russell 2000 turned $10,000 into $72,100
I found these charts very interesting. Part of the reason I’ve felt small/mid caps will outperform large caps this year. Hasn’t come to fruition yet but still 50 weeks to go before the year is up.
I found these charts very interesting. Part of the reason I’ve felt small/mid caps will outperform large caps this year. Hasn’t come to fruition yet but still 50 weeks to go before the year is up.
Thanks for the charts. You do need a bit of patience for this. It does work, but not over one year's time. In '99 big caps were 50% more expensive than small caps. It shouldn't have been a surprise that small caps did better in the ensuing decade.
Thanks for the charts. You do need a bit of patience for this. It does work, but not over one year's time. In '99 big caps were 50% more expensive than small caps. It shouldn't have been a surprise that small caps did better in the ensuing decade.
For sure. I was in large caps for most of last year and flipped to overweight small/mid caps at the end of the year.
... You do need a bit of patience for this. It does work, but not over one year's time. ...
Quote:
Originally Posted by My Kind Of Town
For sure. I was in large caps for most of last year and flipped to overweight small/mid caps at the end of the year.
My feeling on this, as on most financial matters is psychological.
The finance-literature reports that over very long periods, small-caps outperform large-caps. This is because the smaller companies are more dynamic and have more room for growth. Their return should be higher too. Risk is concomitantly higher, but again, this risk is attenatuated with sufficient time. So, an investor with longer time horizon and the discipline to buy-and-hold, ought to overweight small caps.
But the headline stories are about the Dow, the S&P500 and the Nasdaq. They're not about midcaps or smallcaps. Those of us holding lots of midcaps or smallcaps would feel a particular alienation and guilt, when we behold the headline indices rising, but our holdings falling, or at least not rising as much. This is because of herd-mentality.
When I do better than the putative norm, I don't feel elation or self-congratulation, because of a nagging feeling that this superior performance is evanescent, brief, unstable, illegitimate. If however I do worse than the norm, and in particular from adventurism or attempt at being clever, I feel a rude comeuppance, a moral lesson on the horizon. Thus it's better to follow the herd, even if the herd is not particularly successful.
The practical result is that I feel better on days when the S&P and the Russell both fall comparably, than on days, when the S&P rises but the Russell falls.
Yes I agree the price decline for the Nasdaq has been more than enough. There is an important difference between tech companies with high debt and exposure to rising interest rates vs companies that have a disciplined balance sheet and debt load. I don't think Microsoft is going to be put out of business or have its profitability suffer greatly from these rising interest rates lol.
I think we're on the cusp of a major trend reversal here. The last 10 years were characterised by falling inflation and low interest rates, which increased the appeal of US Tech, at the expensive of international value stocks. The valuation differential is now at an all-time high.
With inflation running a lot hotter in the US, and the Fed set to tighten policy, the last weeks have seen the start of a rotation away from US (tech in particular), into international stocks. I think this trend has legs.
If rising rates squashes growth nothing will stand up and that includes international stocks .
We have not had a recession or slow down that the world didn’t feel as well.
When we sneeze the world catches cold.
With profits squeezed from labor increases and consumers and businesses in debt any extra dough sucked away serving debt is a dollar less that can be spent on goods and services
Last edited by mathjak107; 01-17-2022 at 05:22 AM..
With inflation running a lot hotter in the US, and the Fed set to tighten policy, the last weeks have seen the start of a rotation away from US (tech in particular), into international stocks. I think this trend has legs.
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unfortunately overseas economy has slowed as well,Germany is one.
They keep saying despite inflation and rising rate,the economy is strong,I am not too sure,the winter storm has done damage to households,they will be spending to repair their homes,plus high heating bills.
Some said their child daycare expenses is more than their rent,parents are eating crackers for dinner !
But then Rolls Royce and other luxury car makers all have a good year,Rolls Royce infact said the average age of their buyer is 43,which implied some are in their 30s.
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