Monday, June 18, 2018
The three main stock market indexes in the U.S. are down this morning; in fact, the Dow has again dipped below the psychologically pleasing 25,000 mark in today’s pre-market. Yet the small-cap Russell 2000 index — although it is also down marginally ahead of today’s opening bell — remains trading near all-time highs. So why the discrepancy?
Small-cap stocks exist in a much smaller business habitat than do global large-caps of the kind we see on the Dow, Nasdaq and S&P 500. So the contagion of global headwinds is much less likely to affect small-cap stocks, especially in the near-term. And with economic data coming in with uncommon and relentless strength, by all historical measures, small-caps represented in the Russell 2000 reflect the very favorable domestic business environment.
But large-caps now have some serious headwinds with which to contend, at least theoretically. Now that things like a 25% tariff on imported steel is kicking off a tit-for-tat “trade war” between U.S. and its top trading partners — China, Canada, the European Union (EU), etc. — expectations are for a wet blanket to be thrown on these hot economic metrics. Mostly its the uncertainty at this point; we really don’t know just what the impact of trade static will be here in the U.S. or anywhere else.
Aside from the perception of a burgeoning trade war, we’d be in error to avoid considering that the U.S. market’s strong growth is pulling the U.S. dollar into a higher value range than we’ve seen in more than a decade. This could affect trade, not to mention retail, if the U.S. gets more expensive to deal with. Also, oil & gas prices have finally gained some traction after years of supply glut keeping prices per barrel low. This is making global business more expensive, as well — and this has a direct impact on large-cap stocks.
Elsewhere, shares of Rent-a-Center have rocketed up more than 22% in today’s early trading following an announcement that it has agreed to a $1.37 billion buyout by private investment firm Vintage Capital. The total amount breaks down to $15 per share, more than twice what RCII’s low mark was year to date, when the stock was trading below $7.50 per share. The Zacks Rank #3 (Hold) company had a Zacks Style Score (Value - Growth - Momentum) of A. Owners of this stock are sitting pretty this morning.
Mark Vickery
Senior Editor
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
Click for details >>
Image: Bigstock
Why Are Small-Caps Outperforming Large-Caps?
Monday, June 18, 2018
The three main stock market indexes in the U.S. are down this morning; in fact, the Dow has again dipped below the psychologically pleasing 25,000 mark in today’s pre-market. Yet the small-cap Russell 2000 index — although it is also down marginally ahead of today’s opening bell — remains trading near all-time highs. So why the discrepancy?
Small-cap stocks exist in a much smaller business habitat than do global large-caps of the kind we see on the Dow, Nasdaq and S&P 500. So the contagion of global headwinds is much less likely to affect small-cap stocks, especially in the near-term. And with economic data coming in with uncommon and relentless strength, by all historical measures, small-caps represented in the Russell 2000 reflect the very favorable domestic business environment.
But large-caps now have some serious headwinds with which to contend, at least theoretically. Now that things like a 25% tariff on imported steel is kicking off a tit-for-tat “trade war” between U.S. and its top trading partners — China, Canada, the European Union (EU), etc. — expectations are for a wet blanket to be thrown on these hot economic metrics. Mostly its the uncertainty at this point; we really don’t know just what the impact of trade static will be here in the U.S. or anywhere else.
Aside from the perception of a burgeoning trade war, we’d be in error to avoid considering that the U.S. market’s strong growth is pulling the U.S. dollar into a higher value range than we’ve seen in more than a decade. This could affect trade, not to mention retail, if the U.S. gets more expensive to deal with. Also, oil & gas prices have finally gained some traction after years of supply glut keeping prices per barrel low. This is making global business more expensive, as well — and this has a direct impact on large-cap stocks.
Elsewhere, shares of Rent-a-Center have rocketed up more than 22% in today’s early trading following an announcement that it has agreed to a $1.37 billion buyout by private investment firm Vintage Capital. The total amount breaks down to $15 per share, more than twice what RCII’s low mark was year to date, when the stock was trading below $7.50 per share. The Zacks Rank #3 (Hold) company had a Zacks Style Score (Value - Growth - Momentum) of A. Owners of this stock are sitting pretty this morning.
Mark Vickery
Senior Editor
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
Click for details >>