Mega Caps are falling out of favor
TV Interviews with Erin Gibbs
Fox Business News
The December CPI report of 7% annual inflation increased for the 14th consecutive month and a level not seen since the 1980’s. However, it was surprising to see the CPI match expectations so closely. Numbers were bad, markets seemed to have breathed a sigh of relief that they were not even worse.
The repeated calls for the Federal Reserve to raise rates more quickly has sent most bond yields higher and bond prices lower. The 10-year returned to its previous YTD high of 1.78%. While treasury rates are mostly below yields in 2019 the trend is clearly up.
While there is a general risk off sentiment since the new year, one anomaly is the that the large cap S&P 500 index is now lagging the riskier smaller S&P Mid Cap 400 and S&P Small Cap 600 indices year-to-date. The underperformance of the blue-chip benchmark can largely be blamed on some of the same stocks that propelled it to the top of the leaderboard over the last decade. More than half of the S&P 500 year-to-date losses can be attributed to just six previously high-flying technology stocks, with Microsoft alone contributing over a quarter of the decline. The price declines on the “mega” caps has been long called for, particularly when discussing their valuations. They may leave the leaderboard to other assets with lower valuations in the coming months.
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