Long live small caps
After an absolutely devastating March, in which small caps have been punished because of lack of size, funding, connections, etc., it seems that the bleeding has stopped, at least compared to other indexes.
While much has been written about the S&P 61.8 retracement since the March 23rd low and potential retest of those lows, IWM / RTY offers a better relative risk profile, as it seems that much more of the downside has been priced in.
Tailwinds:
- Strong healthcare exposure (22.5%)
- Lack of big name concentration (top 10 names are 4.25% of index), which is very strong now but potentially sign of a reversal approaching (especially in the Nasdaq, where most of the risks have not been priced in)
Headwinds:
- Exposure to financials and REITS (22.6%) is a notable weakness of the index.
- 'What is cheap could become even cheaper'
While much has been written about the S&P 61.8 retracement since the March 23rd low and potential retest of those lows, IWM / RTY offers a better relative risk profile, as it seems that much more of the downside has been priced in.
Tailwinds:
- Strong healthcare exposure (22.5%)
- Lack of big name concentration (top 10 names are 4.25% of index), which is very strong now but potentially sign of a reversal approaching (especially in the Nasdaq, where most of the risks have not been priced in)
Headwinds:
- Exposure to financials and REITS (22.6%) is a notable weakness of the index.
- 'What is cheap could become even cheaper'