The conventional wisdom is that the stock of small companies, called small caps, increases faster than the stock of large companies, called large caps, during a bull market but falls faster during a bear market.  The obvious underlying assumption is that the stock of both large and small companies always move in the same direction.  Small caps just move more.

Did you notice that the Dow, which is all mega-big companies, just hit another all-time record high?  At the same time, the Russell, which is small cap companies, just entered official correction territory, which is down 10%.  I don’t know if something is very wrong, but something is very unusual.

The most obvious interpretation is that investors are seeking greater safety by fleeing small caps and chasing large caps.  Another is that investors are simply chasing dividend income, which is more common in large caps than small caps.  Maybe, the most obvious implication is that this is a mere anomaly that is self-correcting and offers a good entry point for buying small cap stocks now.

The question is how long will this anomaly exist before it self-corrects?