The small firm effect is a theory that purports that smaller firms, or those companies with a small market capitalization, outperform larger companies.
However, since 2019, larger cap firms have been outperforming small cap firms with small cap firms having trouble beating Treasuries!!
The FAAMG index, Facebook, Amazon, Apple, Microsoft, Google, Alibaba, etc. has been skyrocketing in price.
The recent surge in FAAMG corresponds to the reversal in Federal Reserve tightening.
Of course, Apple (AAPL) just issued a warning Monday that it may fail to meet this quarter’s sales guidance thanks to slower production and weaker demand due to the disease known as COVID-19.
That is why we diversify!