After Tuesday’s selloff the Russell 2000 (RTY) has given up much of its year-to-date gains over the S&P 500 (Chart 1). In the two days RTY has gone from outperforming SPX by 11.2% to only 6.3%.
A week ago we noted that the strong performance of RTY since the election and year-to-date has been extraordinary by historical standards, and suggested that it would struggle to outperform going forward.
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After Tuesday’s selloff the Russell 2000 (RTY) has given up much of its year-to-date gains over the S&P 500 (Chart 1). In the two days RTY has gone from outperforming SPX by 11.2% to only 6.3%.
A week ago we noted that the strong performance of RTY since the election and year-to-date has been extraordinary by historical standards, and suggested that it would struggle to outperform going forward.
Still, the magnitude of this week’s decline is quite surprising, especially in light of the coming stimulus that should be highly supportive of US-focused smaller companies.
We see the RTY selloff as an opportunity for trading-oriented investors to reset positions in the RTY index, using the IWM ETF.
Over a 30-year career as a sell side analyst, John covered the structured finance and credit markets before serving as a corporate market strategist. In recent years, he has moved into a global strategist role.
(The commentary contained in the above article does not constitute an offer or a solicitation, or a recommendation to implement or liquidate an investment or to carry out any other transaction. It should not be used as a basis for any investment decision or other decision. Any investment decision should be based on appropriate professional advice specific to your needs.)