Small cap stocks put up a great week last week with the Russell 2000 (RUT) rising 1.16% while the large cap oriented Russell 1000 (RUI) lost 0.59%. The chart below shows RUT pulling away from RUI for the second time this year – the first time beginning in early March before the lead being ceded to the Russell 1000 for a couple of weeks in May. As of Friday, RUT is up 4.67% for the year while RUI has gained 2.21%.
The difference between large cap and small cap volatility was similar to the RUT – RUI performance difference, but of course in opposite directions. VIX rose from 13.84 to 14.21 last week while the CBOE Russell 2000 Volatility Index (RVX) lost 0.05 to finish at 16.51. More significantly the RVX / VIX relationship hit the lowest level since early April. The chart below shows as we are moving into summer the risk perception for domestic small cap stocks continues to trend lower versus the risk of owning more internationally oriented large cap stocks.