There’s A Large Spread Between Large And Small

The S&P 500 always gets the majority of the attention and understandably so, as these 500 504 stocks comprise ~80% of the total U.S. market cap. But something interesting recently happened in the Russell 2000, which represents just ~8% of the total U.S. market cap.

The Russell 2000 has made no progress over the past thirty months.

IWM 30

But in this thirty month period, it has experienced a 26.4% decline on a closing basis, certainly qualifying as a bear market. The deepest decline for the S&P 500 on a closing basis was just 14.2%, quite a large spread between the small and large cap indexes. Interestingly, if the S&P 500 experienced a decline as deep as the Russell 2000, it would have brought the index down to 1568, right back to the 2007 highs.

spx drop

Below are the other times that the Russell 2000 was down 26% and the S&P 500 was down less than 14.5%. The spread between the drawdowns is unusually large and you’ll notice in the chart that the current environment is pretty unusual.

drawdown spread


I’m not going to pretend this means anything, I just thought it was interesting and worth sharing.