Chart of the Day - Tuesday, May 9, 2023

Today’s Chart of the Day was shared in a note by Steven Suttmeier at BofA Global Research. The chart shows the S&P 500 (top) and a ratio of Small Caps vs. Large Caps (bottom) over the past century. One of the most bearish technical developments lately has been the underperformance from Small Cap stocks, as the Russell 2000 is testing three-year lows on a relative basis.  We often view Small Caps as a leading indicator for the broader market, and their relative performance is considered a measure of risk appetite. However, the chart suggests that Small Cap underperformance may not be as bearish as conventional wisdom suggests. Suttmeier notes, "Investors are worried about lackluster Small Caps, but Small Caps tend to lag Large Caps during secular bull markets."