Two Month Rally Rotation

Using the Russell 3,000 as a benchmark, US equities peaked exactly a week ago and have traded lower in all but one session since. In all, the Russell 3000 has fallen 4.33% in that time on weak breadth, albeit certain stocks have been hit far harder than others. Breaking the index down into deciles ranked by a variety of factors, performance has generally been the reverse of what we highlighted earlier this month in regards to the rally off of the June 16th low.

Over the past week, stocks with higher multiples and smaller market caps have fallen the most. Those are also the ones that had become the most elevated above their moving averages after outperforming during the two-month rally from mid-June to mid-August. Conversely, those stocks with more attractive valuations have tended to perform better, although, here too there have been low single-digit percentage declines across deciles. One other interesting point worth noting is how the highest dividend payers have been hit just as hard as other deciles for that category which is a big difference when compared to the spring when the highest dividend payers were the only pocket of positive performance.

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