Long Term Perspective

Small cap stocks have historically shown greater returns than large cap stocks. This is a new index to the S&P family, but the Russell 2000 has a longer history and also measures the small cap sector.

The S&P Small Cap index rose 14.1 percent in 2006 – more than twice its 2005 gain of 6.7 percent. For 2006 the Small Cap index slightly outpaced the S&P500 and soundly beat out its Mid Cap cousin.

Short Term Perspective

Just like the S&P 500 and the Midcap, the Small Cap index includes industrials, utilities, financials and transportation. A larger portion of the companies in this index is from the Nasdaq (41 percent) than for the other two index measures.

The Small Caps have been battered by subprime problems and economic weakness more than the Large Caps or Midcaps. In November, this index was down 0.4 percent, compare to the same month a year ago, and was down significantly from October’s year-on-year gain of 10.5 percent. For November’s twelve month percentage change, this index lags the Dow’s 9.4 percent boost but is “ahead” (less down) of the somewhat comparable Russell 2000’s decline of 2.3 percent.

The small cap index plummeted 7.5 percent in November, after rising 1.8 percent in October. The small caps had gotten moderate boosts over the prior three months from Fed rate cuts. However, subprime issues and increased fears of recession pulled the index down in November. Year-to-date in November, the S&P Small Cap index was down 0.3 percent, compared to the Russell 2000 being down 2.5 percent.