Segments of equity markets dug their way out of their biggest hole since the global financial crisis by early June, breaking for a time into the black for the first time since mid-February. The divide, however, between the haves and have-nots has been very apparent during the rebound. Save for a recent small-cap rally, large caps led the charge by a wide margin.
Large caps lead: Small-cap equities lagged their larger-cap peers by as much as 19 percentage points over the last 90 days and rose more slowly in the second quarter. The S&P 100 outpaced the S&P 500 for most of the rebound.
Mind the gap: The gap between the more broad cap-weighted S&P 1500 and its equal-weighted counterpart widened, even pre-COVID-19 shutdown, showing investors' growing preference for large- and megacap equities.
Fundamental fail: Despite the 36% runup of the S&P 500 index from its March 23 low, forward earnings expectations have failed to keep up, shown by the growing disparity between price and earnings.
Rise in efficiency: Risk-adjusted returns of large-cap U.S. equities have improved over the past 15 years, even challenging U.S. investment-grade debt in portfolio efficiency.