Are small-cap stocks telling us something?
Earlier in 2019 many analysts were calling for small-cap stocks to outperform large-caps due to perceived undervaluation; instead, we’ve seen the sector continue to stall. If we are to believe conventional wisdom suggesting small-cap stocks are the market leader, this should be a reason for concern for the major broad market indices.
The Russell 2000, a stock index comprised of 2000 of the smallest companies in the Russell 3000 Index, which is made up of 3,000 of the largest US stocks. These 3,000 stocks represent nearly 98% of the investable U.S. stock market. In other words, the Russel 2000 represents all but the top 1000 market cap stocks and the fringe stocks with little value.
