Brian Gilmartin | Feb 18, 2018 12:13AM ET
Every 6 weeks the goal is to give readers an update into the various “style box” strategies (large-cap, mid-cap, small-cap, value, growth, etc.) and year-to-date as of Friday, February 16th, 2018, 2018 has started just where 2017 left off in terms of large-cap growth outperforming the rest of the styles.
Horan Capital Advisors out of Cincinnati had a similar post on Twitter today .
Coming into 2018, clients saw their large-cap growth and Tech weighting reduced to benchmark weight (roughly 23% today) while the Financial sector weighting was increased.
Also, the iShares S&P Small-Cap 600 Value ETF (NYSE:IJS)) was added given small-cap and value’s continued under-performance.
Looking at the above spreadsheet, small-cap and value had a great year in 2016, relative to Tech and growth, thus playing “reversion-to-the-mean” around the various styles is another way to attempt to add value to client portfolios. 2017 saw the exact opposite of 2016.
When style-preference changes, it can do so in a hurry.
Even though the NASDAQ 100 and the Comp are still relatively cheap at 23(x) – 25(x) earnings, with low double-digit earnings growth, the expectation is that some rotation would occur away from large-cap growth if interest rates should rise smartly, and break the 3% high on the 10-year Treasury from late 2013.
It’s hard to quantify and I haven’t found any research on it, but certainly you would think that tax reform and cash repatriation benefited the large-cap sector greater than mid and small-cap simply given the cash held overseas by the likes of Apple (NASDAQ:AAPL), Cisco (NASDAQ:CSCO), etc. (Long both names)
Here is the update to the macro and sector allocation:
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