Small Cap Streak Continues

“We’re going streaking.”

-Frank “The Tank” Ricard from Old School

 

The Russell 2000 Index closed higher for the eighth consecutive week last week, its longest win streak since late 2013. In fact, it hasn’t made it to nine consecutive green weeks since 1996—so this type of persistent strength is unusual. What does it mean, you ask? For starters, it means continued equity strength is quite likely if history is a guide.

“Although it is quite rare to see small caps up eight straight weeks, continued gains are perfectly normal. In fact, the S&P 500 Index has been higher six months after this rare streak in each of the past nine times. Near-term, things are stretched, but the bigger picture suggests more equity gains over the rest of the year are possible,” according to LPL Research Senior Market Strategist Ryan Detrick.

As our LPL Chart of the Day shows, stocks could consolidate some over the near term, but solid returns through year-end have been quite common. For the rest of 2018, we continue to like stocks over bonds, small caps over large caps, value over growth, and emerging markets and U.S. stocks over foreign developed equities.

IMPORTANT DISCLOSURES

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual security. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. The economic forecasts set forth in this material may not develop as predicted.

All indexes are unmanaged and cannot be invested into directly. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. All performance referenced is historical and is no guarantee of future results.

Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.

Investing in stock includes numerous specific risks including: the fluctuation of dividend, loss of principal and potential illiquidity of the investment in a falling market. The prices of small cap stocks are generally more volatile than large cap stocks. Value investments can perform differently from the market as a whole.  They can remain undervalued by the market for long periods of time.

Investing in foreign and emerging markets securities involves special additional risks. These risks include, but are not limited to, currency risk, geopolitical risk, and risk associated with varying accounting standards. Investing in emerging markets may accentuate these risks.

This research material has been prepared by LPL Financial LLC.

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