Small Caps, Copper, EM FX Poised to Outpace
Coming into 1Q’21, my expectation was that “in this low interest rate world with pent up aggregate demand and significant slack in the world’s major economies, there is ample room for growth. If growth is the story of 2021, the underperformers of early-2020 should do well.”
Thematically, as a long-term position trader, my point of view has not changed; however, it is worth acknowledging outperformances and underperformances thus far. Notably: I expected, but underappreciated, the pace with which US Treasury yields would rise at the start of the year.
US Russell 2000 (RUT) Technical Analysis: Daily Chart (March 2019 to March 2021)
Chart prepared by Christopher Vecchio, created with TradingView
In early January, it was noted that “small cap and mid cap stocks should outperform large caps ex-tech, and to this end, the Russell 2000 offers more potential than the S&P 500[1]. But the Nasdaq[2] 100 still looks like it wants higher; the symmetrical triangle breakout in early-December 2020 appears to be just getting started.”
The Russell 2000 is up by +12.48% in 2021 while the S&P 500 is up by +6.07%. However, the Nasdaq 100 is only up by +0.70%. Tech may continue to lag in 2Q’21 as the asset allocation churn continues towards growth-sensitive, small- and mid-cap equities. With that backdrop, the Russell 2000 should outpace the S&P 500, which should outpace the Nasdaq 100.
Copper (XCU/USD) Technical Analysis: Daily Chart (December 2019 to March 2021)
Chart prepared by Christopher Vecchio, created with TradingView
Nothing changes in terms of my outlook for the metals: “copper[3] and silver[4] appear poised to outperform gold[5], which typically trails during periods with high liquidity and high
