Featured Market Data
Rally in Small vs. Large Cap Stocks
Small cap stocks surged by an astounding 90% in the twelve months ending March 31 and have significantly outperformed large cap stocks. Only part of this can be explained by recent outperformance of value stocks compared to growth stocks. The chart below compares the relative levels of value vs. growth stocks and small cap vs. large cap stocks. The chart shows how small caps struggled through 2019 and early in the pandemic but began rebounding in the fall on optimism around reopening and have returned to the relative levels of two years ago. Though small caps have slipped recently, value stocks and small caps both have room to continue leading markets.
Source: Bloomberg
Recent News
Will Inflation Return?
Much attention has been given this year to the potential for significantly higher inflation. The list of reasons is long including a highly accommodative Federal Reserve, trillions of dollars in fiscal stimulus already passed by Congress, the President’s newly proposed $2.3 trillion infrastructure plan, progress on fighting the virus and economic reopening, and a stronger employment picture this year. While this is all true and should support an increase in inflation, in line with the Fed’s stated goals, we do not believe inflation will rise meaningfully and persistently above the Fed’s 2% target. Low global inflation, labor market slack in most countries, and excess global supply should keep a lid on U.S. inflation.
Source: Bloomberg
