The last week has seen a sharp reversal in the best and worst performing stocks. The stocks driving the market gains throughout the year (mainly, large caps and growth stocks) have given way to the laggards (small caps and value stocks) over the last few trading sessions.
In the first set of charts below, we show the gains from Jan 1st to Sept 5th for the 250 best performing stocks in the S&P 500 (+37.1%) versus the 250 worst performing stocks (+6.8%). The adjacent chart shows how this trend reversed sharply in the last week: former “top performers” traded down 1.2%, while former “bottom performers” rose 2.2%. We’ve also seen a sharp reversal in small cap stocks over the last week (middle set of charts), which had badly trailed large caps over the year-to-date period. Lastly, value stocks have come into vogue in the last week, while having trailed growth stocks for all of this year (bottom set of charts).
This rotation to the “have nots” was widely seen as unprecedented, due to how quickly the reversal took place (just over a few days). Whether this is a lasting trend, or merely a short-lived breather for the “winners”, we believe it’s as important as ever to remain diversified. While the market continues to march higher, the winners may turn into the losers, and vice versa.