Twitter is abuzz with the news that Apple’s market cap recently surpassed that of the Russell 2000. This is one example of the various charts that are making the rounds:
Becoming larger than the combined value of 2000 small-cap stocks is the latest, somewhat arbitrary, threshold that Apple has crossed.
Even before it eclipsed the Russell 2000, Apple was already larger than:
- The entire S&P 400 mid-cap index
- 4 of the 11 sectors in the S&P 500 (Materials, Real Estate, Utilities and Energy)
- Every country in the All-Country World Index except Japan.
Think about that – Apple has a larger market cap than the entire S&P 500 Energy sector and has a larger weighting in the ACWI than the UK.
What is important is not the relative sizes in Apple and small-caps, but the divergent directions in which they are heading. This crossover comes as Apple has soared more than 30% so far this year while the Russell 2000 is struggling to tread water.
Mega-caps are fueling an index-level test of resistance while beneath the surface more stocks are making new highs than new lows (and have been for 10 weeks in a row).
In other words, we’ve still got the generals leading a charge and the foot soldiers refusing to take the field. It makes for a good story, but history shows it’s not a recipe for success – on the battlefield or in the market.