Small-Cap Stocks Underperform Safe-Bet Large-Caps



Market capitalization analysis

Large-cap stocks above $10 billion make up 87.3% of the Financial Select Sector SPDR ETF (XLF). These stocks have lost 12.2% in the past year and 2.8% during the week ending February 8, 2016. In comparison, the broad market–based S&P 500 ETF (SPY) lost 2.9% during the week.

Small-cap stocks under $10 billion have underperformed large-cap stocks, losing 20.9% in the past year and 4.8% in the past week. The underperformance of small caps relative to large caps during the year hints at vulnerability in the broader market. The sense is that investors choose to stay with large caps because they are safer bets amid uncertain global conditions.

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Market capitalization analysis of sub-groups

Large-cap banking stocks make up 47% of XLF’s portfolio. These stocks have fallen 15.7% in the last year, while small-cap stocks have fallen 20.9%. In comparison, large-cap diversified financial services stocks have fallen 20.9% in the trailing-one-year period, while small-cap diversified financial services stocks have fallen 27.9%.

Last week, large-cap banks lost 3.9% while small-cap banks lost 1.8%. In comparison, large-cap and small-cap diversified financial services stocks lost 4.1% and 5.1%, respectively.

Genworth Financial (GNW), Metlife (MET), and CBRE Group fell 21.6%, 13.1%, and 11.1%, respectively, last week. The gainers for the week were Aon (AON), Allstate (ALL), and Cincinnati Financial (CINF). These stocks rose 5.7%, 4.6%, and 4.6%, respectively, during the week.


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