Looking at the global markets this year, there is one anomaly worth pondering.  Since the early 1990’s, the benefits of globalization have largely accrued to the large companies.  Two years ago, 52% of total revenues for the large companies were derived from international sales.  Therefore, one can assume large cap companies would be more sensitive global slowdowns and less sensitive to internal recessions.

That ain’t the case . . . not this year anyway.

During May, the global slowdown became more painful with the collapse of the China trade negotiation, and large-cap stocks dropped 6.35%, while small-cap stocks dropped a whopping 8.73%.  Because small-caps are less impacted by global trade, it is logical that small-caps would fall less.  (YTD – large caps are up 10.74% but small caps are only up 5.81%.)  What explains this anomaly?

Could it be that small companies are reflecting an internal slowdown that has not yet shown up in the economic data?