"The Russell 2000 is still down -11.8% since then. Don’t just 'buy stocks' in Quad 3 and 4. Buy the right sectors.”
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.