US large cap stocks came charging out of the gate in January, with the DJIA up 2.7% and the S&P 500 up 2.3%. For the PDF, click here. In contrast, the Russell 2000 Index of small cap stocks fell 0.4%.
The large caps lagged the small caps last year but at archerETF, we expect large caps to outperform in 2011.
The US economy is firmly in recovery mode. The latest GDP numbers are strong. Employment is growing. The latest corporate earnings reports are bullish.
Other factors auger especially well for large caps. Their price to earnings ratio is about 13x trailing earnings versus about 17x for the small caps.
Large Cap dividend yields, at about 1.86%, are nearly double small cap yields.
Also with their significant overseas revenue, large caps will benefit from the weak US$. US exports have recovered to pre-recession levels, with strong growth in consumer goods exports.
The US large cap ETF we use as a core portfolio holding is OEF. With 100 mega-cap names, it is more focussed than the S&P 500 ETF (IVV) but more diversified than the DJIA ETF (DIA). We recently increased our allocation to OEF within our clients portfolios.
Tickers Mentioned: OEF, DIA, IVV, SPY, MDY, IWM
Disclosure: We are holding positions in OEF