After what was already a good day for the US equity market, bulls took stocks even higher in the afternoon following the release of the minutes from the FOMC’s October meeting. Investors also weren’t particularly discriminating in their purchases today – at least based on market cap. The top chart below shows the decile performance of S&P 500 stocks based on market cap where decile one contains the 50 stocks with the largest market cap and decile ten contains the 50 stocks with the smallest market cap. Besides decile three, stocks in every other one are up an average of 1%+. Decile ten is the best performing group with a gain of 1.48%, but the stocks in decile one are only 13 bps behind with an average gain of 1.35%, so market cap had little to do with performance.
Market cap may have had little to do with performance in today’s rally, but as we have noted in numerous reports to clients this year, it has been a factor in performance this month and even more so this year. The first chart below shows the decile performance by market cap for S&P 500 stocks in the month of November. Here, the three deciles that are up on the month are among the top four in terms of market cap. Meanwhile, the decile with the 50 smallest stocks in the index are down nearly 100 bps more than any other decile. On a YTD basis, the market cap disparity is even more pronounced. The decile with the 50 largest stocks by market cap is up 8.25% YTD while the decile with the 50 smallest stocks is down just under 20%, and in between it’s almost as though the average return for each decile from two to eight gets progressively weaker. Good thing it’s a cap weighted index!