NEW YORK (Reuters) - After a strong rally that saw the Russell 2000 notch a record in three straight sessions in June, smallcap stocks may be showing signs of slowing down, leading some market participants to question whether their recent bulletproof performance is starting to crack.
After hitting lows on Feb. 8, the Russell 2000 has risen more than 12 percent, far outpacing the gain of 5.2 percent in the largecap S&P 500 .SPX index.
The smallcap index on Friday snapped an eight-week winning streak, however, posting its largest weekly decline since late March, which could indicate the start of a cooling off period.
“We are seeing an inverse relationship between size and value, the bigger stocks are the better bargains and the smaller stocks aren’t,” said Craig Callahan, President at ICON Funds in Denver.
“That would make me skeptical that over the next full year the smallcaps could keep leading.”
Investors have rushed into smallcaps this year, and the trend continued this past week. Lipper data on Thursday showed smallcap growth funds attracted $595 million of inflows for the week, their seventh straight week of gains.
“The big thing has been the amount of money into smallcaps in general, we have seen an awful lot of money just come pouring in,” said Steve DeSanctis, equity strategist at Jefferies in New York.
To view a graphic on Rebased chart of Russell 2000 vs S&P 500, click: reut.rs/2tEjEY9
Smallcaps have become attractive to investors for a number of reasons. Since they are mostly domestically focused, investors reason they are more insulated from a potential trade war
