Small Caps Take a Breather
Investors' anxiety was felt more on small-cap firms this week, unlike most of this year when small caps have led the U.S. equity market.
Market Update
Concerns continued this week regarding the reduction of global stimulus programs that may reduce global growth rates. India unexpectedly raised interest rates in the face of rising inflation. Another factor this week was disappointing housing data. The Commerce Department reported that construction of homes fell 5.9% last month. Investors' anxiety was felt more on small-cap firms this week, unlike most of this year when small caps have led the U.S. equity market.
The Morningstar US Market Index gained 0.69%. The outperformance of small-cap equities took a breather this week, as large-cap equities led. The Morningstar Large Cap Index gained 0.92%, and the Morningstar Small Cap Index was flat.
Likewise, value still leads all styles for the week and for the year. The Morningstar US Value Index gained 1.15%, and the Morningstar US Growth Index was flat. Value leads growth by 3.6 percentage points for the year.
The health-care sector has performed in line with the overall market but could come under a microscope later in the month as the health-care overhaul being considered by the U.S. Congress comes to a vote.
The rally in corporate bonds did not go unnoticed and helped push the Morningstar Core Bond Index up 0.23% for the week. Treasuries hold a large weight in the core index, so the relatively weaker performance here held back the index. The Morningstar US Government Index gained 0.19%, and the Morningstar Corporate Bond Index gained 0.61%. Corporate bonds are now up 2.5% for the year. The difference in yield between corporate credit and Treasuries is 188 basis points, which is down significantly from the credit crisis period. Global bonds reacted similarly.
The Morningstar Long-Only Commodity Index gained 1%. The volatile energy sector was the only commodity sector down for the week; the Morningstar Energy Commodity Index lost 0.6% this week.
| Bond Index One-Week Returns (Data as of 03-19-10) | |||
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| 1 Wk | Yield | Duration |
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| Core Bond | 0.23 | 2.86 | 4.25 |
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| US Government Bond | 0.19 | 2.23 | 4.83 |
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| Corporate Bond | 0.61 | 4.05 | 5.85 |
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| Mortgage Bond | 0.06 | 2.88 | 2.72 |
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| Commodity Index One-Week Returns (Data as of 03-18-10) | ||
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| 1-Week Return % | YTD Return % | |
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| Long-Only Commodity | 1.04 | -3.49 |
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| Long/Flat Commodity | 0.67 | -1.99 |
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| Long/Short Commodity | -0.02 | -1.67 |
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