It seems like investors have been calling for small caps to relinquish the leadership role to their large cap peers for several years now, but up until now it has been all talk and no action for large caps. That is until 2011. So far this year the Russell 3000 is up 2.33%. At the same time, however, the average stock in the index is only up 0.27%. Based on these numbers, the bulk of the performance has been attributable to the large cap stocks in the index.
To further highlight this trend, we broke up the Russell 3000 index into deciles based on market cap and calculated the average YTD return of each group. In the chart below, decile one contains the largest stocks in the index, while decile ten contains the smallest companies based on market cap. As shown in the chart, there is a clear positive correlation between market cap and performance. Decile one is up the most with an average gain of 2.4%, while the average change of the smallest companies in the index is a decline of 2.4%. The year is still less than four weeks old, but so far 2011 has been the year of large caps.
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