There are any number of ways to illustrate the disparate performance of individual stocks based on market cap this year, but the chart below really drives the point home.  The blue lines show the YTD performance of each stock in the S&P 500 starting with the largest in terms of market cap on the left all the way down to the smallest companies on the right.  YTD, the second-best performing stock in the S&P 500 – Nvidia (NVDA) – is also the fifth largest company in terms of market cap.  Besides NVDA, the only two other stocks up at least 15% YTD are Palo Alto Networks (PANW) and Juniper (JNPR).  While just three stocks are up over 15%, seven are down over 15%, including Archer Daniels Midland (ADM) and Boeing (BA) which is down nearly 19%.

While the blue line shows the performance of the individual components, the red line shows the rolling 20 stock performance where the leftmost point on the line represents the performance of the 20 largest stocks in the S&P 500. As shown, the group of 20 stocks with the strongest YTD performance this year is right near the top of the market cap list (stocks 5 through 24 which includes NVDA and AMD).  While there are exceptions, the main trend this year has been that the further you move down the market cap ladder, the weaker the YTD returns.  The 20 smallest stocks in the S&P 500 also have the worst performance of any other point in the series. Not only that, but 17 of the 20 smallest stocks in the S&P 500 are down YTD, including each of the smallest sixteen.

Breaking the S&P 500 into deciles based on market cap further illustrates this pattern.  While 78% of the 50 largest stocks in the S&P 500 are up YTD with an average gain of 3.65%, less than a quarter of the 50 smallest stocks in the index are up YTD, and the average performance of those 50 stocks is a decline of 4.18%. If 2024 is going to be the year of broadening, it’s getting off to a slow start.

The mega-cap Tech-heavy Nasdaq 100 is up nearly 1% today as of this writing, which leaves it up 4.5% already in 2024.  It’s been about a month now since the Nasdaq 100 took out its prior all-time highs from late 2021, but as shown in the chart below, the index is already 5.9% above those prior highs as the breakout continues.

Two more noteworthy stats:

The Nasdaq 100 is now up 64% during its current bull market that began on 12/28/22.

And, since the COVID Crash low that the Nasdaq 100 made on 3/20/20, the index is up a whopping 150%.

Below is a table showing historical bull markets for the Nasdaq 100 since the index came to be in the mid-1980s.  The current bull market is its 16th using the standard 20%+ rally definition, and this bull is now right at the median when it comes to gains and length.  As shown, the current bull has seen a gain of 64.3% over 392 days.  The median gain for all Nasdaq 100 bull markets is a gain of 64.5% over 407 days.

When it comes to the average bull market, however, the current bull has a ways to go.  Because of two very lengthy bulls that saw 600%+ gains in the 1990s and 2010s, the average bull market looks much different than the median bull market.  As shown in the table, the average Nasdaq 100 bull market has seen a gain of 163.2% over 799 days — which is basically double the length and 100 percentage points stronger than the median bull.

The S&P 500 is flat on the session today as of this writing, but that doesn’t take away from the fact that it has traded at record highs in each of the past three sessions. As shown below, the S&P 500 has seen several significant drawdowns in its history, but it has always eventually recovered, and it has traded at or within 1% of an all-time high just as often as it has been down 20%.

Below we break down the percentage of time the S&P 500 has traded within various ranges of an all-time high (ATH) since 1952 when the five-day trading week began.  This week joins the 7% of days that have seen the S&P 500 hitting record highs.  That is the third largest share behind the 12% of days in which the index has been within 1% of a record high and the 8.5% of days when it is 1% to 2% below a record close.  Expanding out a bit more, the S&P 500 has spent 44% of trading days since 1952 within 5% of an ATH compared to just 40.5% of the time when the index has been down 10% or more from an ATH.

In what is a disparity you don’t see very often, just as the S&P 500 hit an all-time high (ATH) on Friday, the small-cap Russell 2000 remains mired in a bear market as it’s still more than 20% from its record high in late 2021.

For the Russell 2000, the magnitude of the index’s drawdown from its record high eclipsed 30% during this current bear market, which is a level it also eclipsed during the Covid crash and then several other times in the index’s history before that.

While the Russell 2000 lost as much as a third of its value during the most recent bear market, the S&P 500’s drawdown was less severe at around 25%.  While the S&P 500 also fell over 30% during the Covid crash, declines of 30%+ from an ATH have been much less frequent which makes sense as you would expect more established companies to have less volatility.

The fact that the S&P 500 hit an ATH even as the Russell 2000 remains down over 20% from its record high has created what is an unusually large disparity between the gaps over where they’re currently trading relative to their ATHs.  In the history of the two indices, there has never been another time where the S&P 500 was at an ATH while the Russell was still down at least 20%, and there is only one other period (October 1998) where more than 20 percentage points separated where the S&P 500 was trading relative to an ATH versus where the Russell 2000 was trading. The current period, where the gap widened to more than 20 percentage points (ppts), is extreme. When you pull a rubber band, you never know exactly when it’s going to snap, but you can always tell when it’s getting close enough that you don’t want to be pulling on it anymore.

What’s interesting to note about all the debate throughout the years concerning small versus large caps is that since the Russell 2000’s inception starting in 1979, its cumulative performance (not including dividends) has been a gain of 4,732%, which works out to 9.0% annualized.  Over that same period, the S&P 500 has rallied 4,936%, which works out to 9.1% annualized. That’s a difference of just 10 basis points annualized.

Large caps currently have the long-term lead over small caps, but the lead has shifted at multiple points over time.  In just the last year, for example, the lead on a cumulative basis has changed eleven times with the most recent change occurring less than three weeks ago.