As the equity market rally tires, large cap stocks are starting to outpace their small cap cousins in the U.S. and global, but here in Canada, the trend is slow in taking hold.
"In the U.S., small caps have been trailing large caps by 279 bp in the last three months," said Vincent Delisle, equity strategist, Scotia Capital Markets.
"Globally, large caps have been assuming leadership since Q3/09, and we expect this trend to continue in 2010 as yield curves flatten and P/E multiple expansion is contained."
The Scotia strategist said the situation in Canada has been the reverse, in large part because the country's small cap space continues to receive big benefit from it's high percentage of commodity-based names as metals demand from China is unabated.
In the past month the TSX completion index has outperformed the TSX by 5.3%. Over a six-month period, the small cap advantage jumps to 30%.
"If the USD continues to edge higher in 2010, the large cap trend should finally play out in Canada in coming months," said Mr. Delisle.