Small Caps Confirm Counter-Cyclical Outperformance

So far this year small caps (S&P 600 index) have underperformed large caps (S&P 500) by about 3%.  We compute the relative performance of small caps vs. large caps as a cross check against the relative performance of other assets.  Small cap underperformance historically is well correlated to cyclical underperformance.  So, it is not surprising that counter-cyclical groups within the S&P 500 are outperforming the cyclical sectors.