It is well-documented that the benchmark US index, the S&P500, has been led by a relatively small number of big winners over the past year, with the remaining stocks languishing in relative terms. There appears to be a persistent size factor at play here, but this phenomenon extends beyond the S&P500 to the midcap (S&P400), and indeed, small cap indices (e.g. Russell 2000). In this note, we explore this dynamic and make some observations about index construction and considerations in expressing one’s view on US equities.
