Russell 2000

Authored by Mark St.Cyr,

If you were one of the myriad analysts, next-in-rotation fund managers, tech commentators, et al paraded across the financial/business media over this past week – you had a good week. The narrative of “earnings beats” together with the so-called “relief rally” emanating via the French elections helped propel the argument.

However, if one (once again) peered passed the headlines of Non-GAAP reporting alchemy that would make Issac Newton envious one could clearly see that all was not “gold.”

Last week, it was coffee speculators; this week it's Small Cap traders. Despite tumbling earnings expectations, the Russell 2000 surged to a new record high yesterday.

However, as Bloomberg notes, if there’s one thing hedge funds became persuaded of in the last few months, it’s that the rally in U.S. small caps was over.

One of the recurring themes on this website over the past two years has been the growing threat posed by the flood of capital out of active investing and into passive, and far cheaper and better performing (under central planning) vehicles such as ETF.

For a quick rundown, here are some recent posts on the topic:

Wall Street still exudes widespread optimism that 2017 will provide another year of solid gains for stocks amid stable albeit unspectacular economic growth and only gentle interest rate rises. However, as The FT details, all is not well in reality, and the following seven charts will hearten investors of a more bearish persuasion...

Submitted by Nick Colas of Convergex

ETFs And The Pricing Of Disruptive Innovation