Small Caps Leading
Since the stock market lows of mid-March 2020, Small-Cap Stocks have been on a tear relative to Large-Cap Stocks. To explore the point, we graphed the following ratio: VB / VV with 10-years of data. VB is the Vanguard U.S. Small-Cap ETF and VV is the Vanguard U.S. Large-Cap ETF. The ratio demonstrates their relative performance.
Since the closing low on 23 March 2020, the VV U.S. Large-Cap ETF has appreciated 76.8% (to 12 January 2021). The VB U.S. Small-Cap ETF has appreciated by 112.3%. The difference is stark: Small-Caps have out-performed Large-Caps during the market recovery by a whopping 35.5%.
Small Caps Out-Pacing Technology Stocks Too!
Next, we compared the U.S. Small-Cap ETF to the tech-heavy NASDAQ-100 Index ETF from Invesco (QQQ), over the same period. The results may surprise you! Small-Cap Stocks have outpaced the tech-heavy NASDAQ-100 Index by 27.5%. Since the close on 23 March 2020, the QQQ is higher by 84.8% (vs. 112.3%).
3/23/20 – 1/12/21
|VB – Vanguard U.S. Small-Cap||112.3%|
|VV – Vanguard U.S. Large-Cap||76.8%||-35.5%|
|QQQ – Invesco NASDAQ-100||84.8%||-27.5%|
On the way to the lows in March, investors suffered the swiftest sell-off in modern history: Small caps sold off 42%, Large-Caps sold off 34% and Tech Stocks sold off 28%, all in a month. If you stayed invested, you made-out OK. From the highs in February 2020 to yesterday’s close, QQQ (NASDAQ-100) is higher by 33.2%, while VB (Small-Caps) is higher by 23.0% and VV (Large-Caps) is higher by 16.2%. While it pays to stay invested, the swings can be a challenge.
Finally, we calculated the Volatility of the 3 ETFs over the past 12-months (252 days) and 5-Years (1,260 days). The recent volatility figures are nearly twice the long term averages, confirming that the past year has truly been a wild ride!
Feb. 2020 to 1/12/21
|12-Month Volatility*||5-Year Volatility*|
|VB – Vanguard U.S. Small-Cap||-42.0%||39.3%||22.0%|
|VV – Vanguard U.S. Large-Cap||-34.3%||34.4%||19.1%|
|QQQ – Invesco NASDAQ-100||-28.0%||35.8%||22.0%|
12-Month and 5-Year volatility are the annualized standard deviation of daily returns over the periods.
All performance figures are Total Return, and assume the re-investment of dividends.