Large caps may be better positioned than small caps given where we are in the business cycle. Small cap stocks have performed well so far in 2019, with the Russell 2000 Index, the most popular small cap benchmark, up 15.2% year to date compared with the 12.6% gain in the large cap S&P 500 Index. Small caps tend to do better when economic growth expectations improve and stocks broadly rally, which has been the case since late December 2018. However, we believe the environment is getting tougher for small caps. In today’s Weekly Market Commentary, we discuss five reasons to favor large caps over small for the rest of 2019, and we’ll look at some of small caps’ key technical indicators on the LPL Research blog later today.
Labor markets still look strong despite weak February data. A disappointing 20,000 jobs created in February should not distract investors from overall labor market strength. With over 500,000 jobs created over the prior two months, job creation still averaging over 200,000 per month over the last year, and solid wage growth, labor markets remain a highlight of economy. Job growth remains well above the cycle average, signaling low odds of entering a recession in the short-to-medium term. Nevertheless, the weak jobs report, along with in-line inflation data, should keep the Federal Reserve (Fed) on message when it meets this week, with the chance of a rate hike near zero and a likely continued emphasis on patience. We’ll elaborate on these points in today’s Weekly Economic Commentary.
Week ahead. The Fed meeting highlights the week ahead, though no rate hike is expected. Leading Economic Index (LEI) and Philadelphia Fed Business Outlook releases are also noteworthy. Overseas, attention in Europe will be focused on Brexit developments with the economic docket being light aside from Germany’s Producer Price Index and Eurozone consumer confidence readings. In Japan, import and export data are due out, along with LEI data on Wednesday. Track these and other important events on our Weekly Global Economic & Policy Calendar.
LPL Research on Yahoo! Finance. Senior Market Strategist Ryan Detrick was on Yahoo! Finance last Friday discussing the current state of markets and the economy. You can watch the full interview here.
- Japan Industrial Production (Jan)
- Eurozone Trade Balance (Jan)
- Durable Goods Orders (MoM Jan)
- Federal Reserve Rate Decision (Mar)
- Germany PPI Report (Feb)
- Japan Leading Index (Jan)
- Japan Coincident Index (Jan)
- Philadelphia Fed Business Outlook (Mar)
- Initial Jobless Claims (Mar 16)
- Leading Index (MoM Feb)
- Eurozone Consumer Confidence (Mar)
- Japan CPI Report (Feb)
- Nikkei Japan Manufacturing PMI (Preliminary, Mar)
- Markit US Manufacturing PMI (Preliminary Mar)
- Markit US Services PMI (Preliminary Mar)
- Markit US Composite PMI (Preliminary Mar)
- Exisiting Home Sales (MoM Feb)
- Markit/BME Germany Manufacturing PMI (Preliminary Mar)
- Markit Eurozone Manufacturing PMI (Preliminary Mar)
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