Micro caps rise on Monday against a general fall in US Indexes.. a shift in risk perception?

The US Indexes were all down on Monday, the Mag7 performed better than the indexes. The VIX was up 1 at 15, this continues to look low considering the recent market swings. The main indexes on Monday were; DJIA -0.54%, S&P 500 -0.61% and Nasdaq -0.62% (Mag7 -0.26%). On an equal weighted basis (our measure) the overall market was +0.51%. Breadth of 48% (daily range of 22% to 71% over the last 2 weeks). Daily volumes of 11b (the range since the election is 8b to 13b). 

Daily returns on - equal weight basis: Market +0.51%, Mag7 -0.26% (AAPL +1.6%, MSFT +0.6%, GOOGL +0.5%, META -1.6%, NVDA -2.6%), large cap -0.3%, medium cap -0.1%, small cap -0.1% and micro cap +1.3%. 

Weekly returns - equal weight basis: Market -0.2%, Mag7 +4.1% (TSLA +9.2%, AMZN +7.3%, META +3.5%, MSFT 3.5%, AAPL 3%), large cap -0.3%, medium cap -0.4%, small cap -1.3% and micro cap +0.7%.

Our risk monitor remains in favour of the larger cap stock. Micro caps have turned recently and have now outperformed the market by 2.1% over the last two weeks.

More recently we have seen pockets of high performance in Blockchain, Drones, Renewable Energy Equipment, Quantum Computing .. but the performance, certainly within the Micro cap arena, appears to have broadened out. Yesterday's outperformance of the Micro cap stocks is the first clear indication in over a year, that Investors are prepared to take on more risk. Whether this is sustained is unclear but with interest rates falling in the US the trend of increased risk taking would seem reasonable. Indeed the last time the US market saw significant falls in interest rates and inflation was in the early 1990s the risk stocks outperformed for a couple of years - see the Market history page. Looking specifically at Micro cap the big movement was seen in: Technology (Software +5.4%, Wireless Telecom +5.5%, Semicons +2.1%, Electronic Equipment +1.8%). Energy (Renewable Energy Equipment +6.5%). Consumer Cyclical (Department Stores +4.9%, Speciality Retailers +4.8%). Healthcare (Biotech +1.9%). 

Across all market cap bands the big movers on Monday were: Basic Materials +1.6% (Gold +2.9%, +2.9%, Platinum +3.2%). Energy (Renewable Energy Equipment +6.5%). Technology (Online Services +2.3%, Integrated Hardware +1.7%, SemiCon +1.4%, Phones & Handheld +4.2%, Household Electronics +2.8%). Healthcare (Biotech +0.9%). Consumer Cyclicals (Household Goods +2%, Leisure Products +2%). Consumer Non-Cyclicals (Drug Retailers +3.1%).

A notable number of 52 week highs was seen in the following sectors: Consumer Cyclicals very strong (across there sector ex Auto, but Hotels and Media & Publishing very strong), Financials, exceptionally high number, particularly Banking & Investment Services, Industrials (Machinery, Tools & Heavy Vehicles). Technology very strong (Software & IT Services, Technology Equipment).

Notable high volumes in all sector: High levels in Basic Materials (Metals & Mining) Consumer Cyclicals (across the sector), Financials (across the sector), Healthcare (across the sector), Industrials (across the sector) and Technology saw a very high number (Software & IT Services, Technology Equipment)