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“We have so much to say, and we shall never say it.” ― Erich Maria Remarque, All Quiet on the Western Front
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Investors are doing their best to reverse yesterday’s weak tone and end the week on a positive note. Last Friday, we were finally able to buck the trend of declines heading into the weekend, and if the market could do it again today, that would be a positive sign. The only economic report on the calendar is Michigan Consumer Sentiment at 10 AM, and the inflation expectations components of that report will be the primary focus of the day- at least when it comes to scheduled data.
Unlike every other day this week where the S&P 500 traded higher on the day and the equal-weighted version traded lower, on Thursday, they both traded lower with declines of about 0.8%. In just the first four days of this week, the equal-weighted index underperformed the cap-weighted index by 1.5 percentage points, and over the last 200 trading days, the performance gap between the two indices now stands at over 15 percentage points. A gap that wide is practically unheard of, and since 1990, it has been wider on 55 trading days, and they all occurred in the periods spanning December 1998 through April 1999 and then briefly between March and April 2000.
The record performance gap between the market cap and equal weight versions of the S&P 500 topped out briefly above 20 percentage points for a day in March 2000, but there were multiple occurrences in the early 2000s and coming out of the Financial Crisis when the performance gap was over 20 percentage points in favor of the equal weight index. When you think about it, it makes sense as it would be easier for the smallest stocks in an index to see big moves (especially after a large market decline) than it would for the largest companies in the world.
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