Through the first half of the year, growth stocks are running well ahead of value stocks and large-caps have a decided edge over small-caps. There is a double-digit return differential between the extreme size and style corners as large-growth stocks advanced 13.3% against small-value’s 0.9% rise. The year-to-date trend reversed in June slightly, however, as the mega-cap darlings faced selling pressure, perhaps a sign they’ve run too far too fast.
The Information Technology sector lost ground in June, its first monthly loss in 2017, but periodic pullbacks are healthy. The year-to-date return for the sector still leads the pack at 17% and is the reason the Nasdaq index had its best first six months of a year since 2009. Energy and Telecom continue to slip while Financials and Healthcare saw strong gains in June amid changes in policy outlook.
Measures of volatility such as VIX remain remarkably subdued given the many potential economic and political flashpoints. VIX showed minor fluctuations but stayed below 12, showing little short-term concern in the market. There are some who are nervous this period of low volatility is blinding investors from potential trouble down the road. However, not being invested in a low volatility market 'can be costly'. Of particular note is the Fed’s readiness to begin unwinding its balance sheet, evidencing the expectation of continued economic growth. This could lead to temporarily increased market volatility but continued economic expansion is bullish for equity holdings.