Transcript:
Tom Vaughan:
Hello, everybody, welcome to Thursday, the S&P 500 was down point 3%. Today, and really kind of a slow Dale together another good chance for me to talk about one key thing and would be watching for next year. And that’s the relationship between Large Cap stocks and Small Cap stocks. So oftentimes, in my opinion, the stock market is ahead of the news. So if we wait for news about inflation, or all of these different areas, you know, we’re already behind the stock market, which has been moving in some direction before that. So one of the key things is to watch what happens with Large Cap stocks versus Small Cap stocks, because that’ll tell you a lot about inflation in this particular instance. So, for example, in a higher inflationary environment, Small Cap stocks, which are often you know, highly priced, at least in this environment, can sometimes suffer when they’re raising interest rates. And so we’ll see what happens with that by watching those two indexes.
So for example, right now, we’ve seen Large Cap stocks do a lot better than Small Cap stock, the expectation is that inflation is going to be higher next year, for example. And so but that doesn’t mean we will have higher inflation. There’s all kinds of debate about that, obviously. But again, by the time we find out about it, it’ll be too late to do anything about it in terms of stock market, you know, adjustments. So if you watch those two indexes, for example, the S&P 500 versus the Russell 2000, which is a Small Cap index, it can give you kind of an early indicator of what’s happening. So if the S&P 500 continues to do better than the Russell 2000, which continues to erode, for example, that would mean most likely that inflation is still coming and that the Federal Reserve is maybe even gonna have to tighten faster and those types of things. If you start to see Small Cap stocks do really well and start to take off and especially relative measure versus the S&P 500. That could mean that inflation isn’t going to be as bad as we think. And we might hear that news, you know, a month later or what have you.
So today, the Small Cap stocks did better than the big cap stocks. But overall, we’ve definitely seen emotion towards those Large Cap stocks. And again, that’s just a place where people feel, you know, I can go to Apple, Apple can get pretty good pricing, you know, control, even in an inflationary environment, bigger companies and smaller companies might have a little bit more of a challenge in those types of environments. So, you know, we’ll see how this plays out as far as that goes, but it’s definitely something to watch. It’s a good early indicator for what might be happening. So look forward to talking to you next year. The market is open tomorrow, but it will be taking the day off. So I’m so happy that everybody’s able to join me this year. Thank you so much for watching all these videos and look forward to talking to you on Monday. Thank you very much.