Gavekal Capital: What Goes Up Must Come Down? Small Caps Have Outperformed On The Way Up

Thursday, December 12, 2013

What Goes Up Must Come Down? Small Caps Have Outperformed On The Way Up

A common theme off the bear market low of 3/9/2009 has been the relative outperformance of small-cap stocks vs large-cap stocks. This latest advance since October 1st has actually seen large cap stocks outperforming small cap stocks. This has happened during a few instances over multi-year advance but not very often as the chart below shows. The question to ask is this: if we are beginning to see a longer period of small-cap relative underperformance is this another example of market breadth deteriorating and the bull market narrowing (as we have highlighted here and here recently)?

About Gavekal Capital

Gavekal Capital is a US registered investment advisory firm that manages the Gavekal Knowledge Leaders Strategy. Knowledge Leaders are a group of the world’s leading innovators with deep reservoirs of intangible capital. These companies often possess competitive advantages such as strong brand, proprietary knowledge or a unique distribution mechanism. Knowledge Leaders are largely service-based and advanced manufacturing businesses, often operating globally. Gavekal Capital seeks to identify the world’s leading knowledge companies through a proprietary process that analyzes corporate knowledge investments.
We offer the Gavekal Knowledge Leaders Strategy in multiple products for global investors. For more information about our product offerings please visit http://www.gavekalcapital.com.
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