There has been a lot of talk about how just a few leaders are responsible for buoying the markets. You might be thinking about the outsized gains in Netflix and Amazon, however, we are seeing massive relative out performance of the larger stocks not just in the S&P 500, but in the Russell 2000 as well.
The Russell 2000 is down just 0.18% on the year. However, the cap-weighted nature of the index has hidden some of the decimation we’re seeing at the bottom. The smallest 10% has been a minefield; more than 40% of those stocks are down at least 50% from their 52-week highs.
How relevant is any of this? The bottom 10% makes up just over 1% of the Russell 2000, so most people have been spared from this carnage. I don’t know what the historical numbers look like in this space, but I’d guess 50% haircuts for these companies is somewhat normal. What will be interesting is to see if this starts to bleed into some of the larger names that actually move the index.