Everything Is Back To Normal

Well, we knew it was going to happen at some point. It finally seems that the IWM is out of gas compared to the major tech stocks which have spent the better part of 6 months going sideways. Over the long term, the trend of tech eating the world has been playing out, with large cap tech outperforming almost everything, especially mid cap blend, represented by IWM. COVID only exacerbated this trend as our lives went online, leaving even less room for earnings on the part of IWM components. Since the vaccine was announced, IWM has been crushing everything else almost as a form of mean reversion, as expectations for opening plays have gained buoyancy, particularly oil + commodities.

The recent MASSIVE divergence in outperformance tells me that the market is starting to get back to it's typical regime, of multiple growth in the tech oligopoly, and structural underperformance from the more mid cap value leaning IWM blend. I think its highly possible that QQQ sees highs in the next two months despite the crazy multiples, and IWM languishes. In other words, everything is back to normal.

Cheers!