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Market Cap Analysis: Are Investors Still Nervous?

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Mar. 29 2016, Published 8:12 a.m. ET

Market cap analysis

Large-cap stocks above $10 billion account for 87.3% of the Financial Select Sector SPDR Fund (XLF). These stocks have lost 4.8% in the past year and 1.1% during the trailing five days ending March 24. In comparison, the broad market–based S&P 500 ETF (SPY) lost 0.7% during the same period. Small and mid-cap stocks—those under $10 billion market capitalization—performed in line with large-cap stocks last week. They lost 1.1%.

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However, during the past year, they underperformed large caps and fell 16.9%. The underperformance of small caps relative to larger companies during the year hints at the vulnerability in broader markets. The sense is that investors choose to stay with large caps because they’re safer bets amid uncertain global conditions.

Market cap analysis of subgroups

Large-cap banking stocks account for 47% of XLF’s portfolio. These stocks lost 11.7% in the past year. Small-cap banking stocks lost 12.5%. In comparison, large-cap diversified financial services stocks lost 9.3% in the trailing one year. Small-cap diversified financial services stocks lost a whopping 29.3%.

Last week, large-cap banks lost 0.2% and small-cap banks gained 0.2%. In comparison, large-cap and small-cap diversified financial services stocks lost 1% in value, respectively. Plum Creek Timber (PCL), State Street (STT), and Bank of America (BAC) led the gains in XLF last week. These stocks gained 3.4%, 2.4%, and 2.1%, respectively, during the trailing five days ending on March 25.

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