Thursday, April 8, 2010

Quick Update on Equity Markets

So far this year US small cap stocks are leading the charge. Small Cap stocks are traditionally companies valued below $1 billion. They are up an impressive 12.23% year to date through 4/7/10.

IWM (Russell 2000 Exchange Traded Fund) +12.23%

SPY (S&P 500 Exchange Traded Fund) +6.59%

EFA (MSCI EAFE Index) +2.15%

EEM (MSCI Emerging Markets Index) +4.48%

Generally considered dollar strength beneficiaries, the nice rally in the green back has certainly provided strength to the small cap stocks. Meanwhile, the European stock proxy (EFA) has seen slight underperformance due to the Euro weakness. For instance, the DAX Index which is comprised of 30 selected German Blue Chip stocks is up 3.6% this year in local currency (Euro), but is down 3.42% in US Dollar terms. Additionally, emerging stocks have failed to keep pace with US markets.

All in all, this pattern of outperformance in small cap stocks can be very comforting to bullish investors. Outperformance reflects investor comfort in risky positions. Coupled with a bullish trend there is still reason to anticipate more gains.