While we wait around for the most anticipated recession in history, one thing seems clear to us. Only one size segment of the U.S. market has priced in any sort of recession, small capitalization stocks (small caps). As measured by the S&P SmallCap 600® Index, small caps peaked in early November 2021. Large caps (measured by the S&P 500® Index) did not peak until the first trading day of 2022. From their peak on November 8, 2021, the S&P SmallCap 600® Index has lost 19.0% on a total return basis versus a loss of just 6.0% for the S&P 500® Index. Since the S&P 500® Index peaked on January 3, 2022, small caps have also lagged large caps (-16.4% vs -8.0%).

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