Why We're Bearish On The Russell 2000

05/20/19 12:09PM EDT

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Why We're Bearish On The Russell 2000 - russell RUT cartoon

"The Russell 2000 is still down -11.8% since then. Don’t just 'buy stocks' in Quad 3 and 4. Buy the right sectors.
–CEO Keith McCullough, Early Look, 5/20/1

Investors who don't have a framework for interpreting macro markets may be scratching their heads wondering why—despite a 20% rally from the December lows in the S&P 500—the Russell 2000 remains a laggard down almost -12% from its August 2018 all-time highs.

After getting completely body-bagged in the Quad 4 (U.S. Growth and Inflation slowing) in Q4 selloff, the Quad 3 (U.S. Growth slowing and Inflation accelerating) pivot has prevented the Russell 2000 from recapturing its prior peak.

From a US Equity perspective, things to think about being short and/or underweight in Quads 3 and 4 are: 

A) HIGH BETA was down another -2.8% last week and is DOWN -5.9% in the last month
B) SMALL CAP was down another -2.7% last week and is DOWN -6.0% in the last month
*Mean performance of Top Quartile vs. Bottom Quartile, SP500 companies 

HIGH BETA and SMALL CAP continue to develop into Bearish @Hedgeye TRADE & TREND Factor Exposures.

Why We're Bearish On The Russell 2000 - style factors

Why We're Bearish On The Russell 2000 - market edges

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