Credit Suisse has issued its US Equity Strategy for November. Its view for October was that mega caps, value stocks, and banks outperformed; but small caps, growth stocks, and healthcare stocks by and large underperformed.
Maybe size and safety do matter here. Small caps were listed as the worst performing size segment in October. Meanwhile, mega caps outperformed the most.
And on not chasing the latest and greatest growth stocks, Credit Suisse pointed out that value stocks outperformed growth stocks within small, mid and large cap groups.
Is there a correlation breakdown taking place? This can happen in periods of uncertainty. Credit Suisse showed that realized correlations fell in October. What stands out more importantly here is that those correlations are nearing four year lows — meaning things might not be performing relative to peers and asset classes as much as expected.
There was even a mixed performance among the market darlings. The 25 most popular names in mid cap funds lagged. Meanwhile, the most popular names in large cap funds performed in-line and the most popular names in small cap funds lead.
Also noted in October was that the small and large caps with high return on equity, high free cash flow yield, high buyback yield, recent dividend increases/initiations, lower valuation, higher market cap and lower beta outperformed those with the opposite characteristics.
On a year-to-date basis, it is mid caps which have led and even small caps, despite recent weakness, are outperforming large caps. Value has outperformed growth in 2016.
This was one of those long reports which sums up more of the past than brings any stark revelations or predictions for what may lie ahead. With the presidential election just a few days out, most of us are just trying to get past that media onslaught.