The U.S. Stock Market is the most concentrated it’s been since the Great Depression pic.twitter.com/VpsGnsHJNY
— Win Smart, CFA (@WinfieldSmart) April 9, 2024
The dwindling presence of small-cap stocks in the US equity market is ringing alarm bells reminiscent of the Great Depression era. Currently, these stocks represent less than 4% of the entire market, a figure not seen since the 1930s.
As the hype around AI technology continues to grow, small-cap stocks find themselves lagging behind their larger counterparts. The Russell 2000 index, a key benchmark for small-cap stocks, paints a grim picture with over one-third of its constituents reporting negative earnings, a notable increase from previous years.
This downtrend has left small-cap stocks in a precarious position, with sentiment towards them souring among investors. The concentration of the market, reminiscent of the lead-up to the Great Depression, coupled with the Federal Reserve’s tightening of the global Dollar supply, raises concerns about the stability of the financial system.
The parallels to the events of the 1929 market crash are hard to ignore. Back then, the Federal Reserve deliberately restricted the Dollar supply for years, leading to significant market upheaval. Are we witnessing a similar scenario unfold today?
As small-cap stocks face increasing headwinds and market concentration reaches historic levels, investors are left to ponder whether these trends are harbingers of impending market trouble. The lessons from history serve as a stark reminder of the importance of vigilance in the face of market uncertainties.
Small- cap stocks now account for less than 4% of the entire US equity market.
They now reflect the same percentage of the market as 1930 before the Great Depression.
As AI-hype as spreads, small cap stocks have significantly underperformed large caps.
Currently, more than… pic.twitter.com/uzFp0CcJMf
— The Kobeissi Letter (@KobeissiLetter) April 8, 2024
The last time the Federal Reserve contracted the global Dollar supply by this much was in 1929 when they wanted to fundamentally change the system.
They intentionally kept the supply tight for years to accomplish this. t.co/LWLr5J7RJD pic.twitter.com/cmpl7aFAfT
— Financelot (@FinanceLancelot) April 9, 2024
Since the Great Depression you say? 🤔 t.co/wjo44CqPtO pic.twitter.com/B0k3h1SH58
— Financelot (@FinanceLancelot) April 8, 2024
I never saw a market being so illiquid from Asia to Europe to US with the exception of holiday periods
At some point today the thought of banks/brokers having maxed out their balance sheets to keep supporting the constantly growing #0DTE volumes crossed my mind
It might also… t.co/m83wnGHGpB pic.twitter.com/mL74MGeTAG
— JustDario 🏊♂️ (@DarioCpx) April 9, 2024
"Performance has pushed the weight of riskiest assets (equities and credit) in all mutual fund & ETF portfolios close to peak levels."
– SocGen pic.twitter.com/gGofJdBYmV
— Daily Chartbook (@dailychartbook) April 9, 2024
Shrinking money supply / faster nominal growth means higher velocity. Higher inflation. pic.twitter.com/vn3a85hhJl
— Michael J. Kramer (@MichaelMOTTCM) April 9, 2024