Small Cap Absorbs Market Correction

By all accounts it was a tough quarter for small capitalization stocks. While the absolute returns for the quarter were positive with the Russell 2000 Growth gaining 1.72%, the month to month movements were much more abrupt than evidenced by the final result. Performance was truly a tale of two halves.

Market Update

The first half reflected the continuation of concerns that surfaced in March over the trajectory and timing of interest rate increases, declining treasury yields and both economic and earnings reports that were disappointing relative to consensus. With these concerns at the forefront, the fastest growing stocks across the capitalization spectrum came under pressure as investors re-evaluated current valuations. As a matter of fact, from March 7th through May 16th the Russell 2000 Growth index declined 11.11%, reaching official correction territory. This valuation correction was swift and abrupt and confined predominantly to small capitalization stocks, as the S&P 500 over the same period, increased by 0.45%. The selling pressure began to abate in Mid-May, coincident with a broad improvement in macro-economic statistics. With first quarter GDP weakness increasingly looking like an aberration, concerns eased regarding the economic outlook, and the Russell 2000 Growth rallied 9.68% from May 16, 2014 through June 30, 2014.  Read the Full 2nd Quarter Report HERE.

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