Predictions 2011 Revisited: How Did Small Caps Do?
Small caps underperformed in 2011 except in the last 5 months after the S&P Downgrade as employment improved.
Earlier in the year we made predictions about how the market and overall economy would do in 2011. We made bold forecasts about unemployment, pessimism vs. optimism, stocks vs. bonds and small cap stocks vs. large cap stocks. It’s time to look back at how we did.
Did small cap stocks outperform large cap stocks this year as we predicted? Not all year. We were clear that it all depended on employment growth – which made a turnaround since August.
Predictions 2011: Sectors Small Caps Vs. Large Caps? (Dec. 28, 2010)
If unemployment continues to fall, or a growth spurt occurs in 2011, safe plays will lose favor to more risky assets. A strong consumer in mid 2011 could change scenarios drastically but overall market capitalization will matter for choosing sectors/picks for growth. Read the full 2011 Tory Capital small cap forecast here.
In a year marred by political uncertainty, an S&P downgrade of the U.S., natural disasters, and increased activity in the Middle East, consumer staples and defensive stocks were the best play for most of the year but the Russell 2000 outperformed the overall market in the last quarter of 2011. In the graph above, see the comparison of the Russell 2000 versus the overall market since the S&P downgrade in early August 2011.
- Russell 2000 (iShares) blue
- S&P 500 green
- Dow Jones Industrials red
The Russell 2K – has made a comeback and this forecast will be revisited for 2012.