Chart of the Day - Monday, February 28th, 2022

Today’s Chart of the Day was shared by Christian Fromhertz (@cfromhertz). It's a ratio chart of the Russell 2000 vs. the S&P 500 over the past year ($IWM/$SPY). The S&P 500, Dow, and Nasdaq all fell more than 3% in February, however, the Russell 2000 managed to close higher by about 1%. Small-Caps have been underperforming Large-Caps for nearly a year now, but this was the best month for the Russell 2000 vs. the S&P 500 since January 2021. As we know, Small-Caps tend to lead the broader market higher or lower. They're perceived as risker and more aggressive than their Large-Cap peers, so their relative performance serves as a good barometer for risk appetite. When Small-Caps are outperforming, it's a sign that market participants have a healthy appetite for risk. When they're underperforming, like they have been for the past year, it suggests a lack of risk appetite. This is an encouraging start, but bulls want to see Small-Caps continue to outperform.