The sell-off since the S&P 500 and Dow Jones Industrial Average made all-time closing highs on July 19th has been broad. All the major indices I track are down between 7% and 11%. I track these indices looking for divergences in returns that might be a clue to where leadership is emerging and whether prior leaders are turning to laggards. Given recent discussions on Wall Street about trends for large cap vs. small cap and growth vs. value, I thought a broad look returns since the market turned lower would be useful.
From the July 19th peak through the close on August 14th, the DJIA has fallen 6.9% making it the best performing major US index. The S&P 500 and NASDAQ are down by 8.1%, while the S&P 400 Midcap has fallen 9.4%. Within the market cap indices, the Russell 2000 has been the worst performer, declining by 10.5%. I see little predictive value in these returns as they strike me to be consistent with expectations given the greater volatility of the Mid Cap and Russell indices.
Looking at style, using the Russell 1000 and 2000 Growth and Value ETFs, there has been a slight edge for growth. Large cap growth is down 7% vs. an 8.9% decline for large cap value. The discrepancy in returns is larger in small caps style indices. The Russell 2000 Growth is down 8.8% vs. an 11.3% decline for the Russell 2000 Value. I suspect the carnage in small cap financial stocks accounts for the lagging performance of small cap value.
International markets have suffered similarly to the US markets. Based on the ETFs, the EAFE is down 8.9% while emerging markets (EEM) are down 11%, quite similar to small cap US. Japan has held up better, with the Nikkei 225 falling just 7%, but Japan had lagged the US and Europe in the weeks prior to the July 19th peak.