Amid the choppy grind higher in US equities one key aspect for investors to look for is the prospect of the long-run relative bull market in small caps to end.  If we look at the straight price ratio between the S&P 500 and the Russell 2000 it is now close to an all-time low (only piped by the trough in 1984).

(click on charts for better viewing)

251113_SP 500 v Russell 2000In addition, the relative valuation of the S&P 500 (measured by the price-to-book ratio) is now at an almost 20 year low.

251113_SP 500 v Russell 2000 2

The investment implications are clear in our view.  Given the market appears set to grind higher we would rather be long large caps than small caps. Lucrative long-term opportunities are now much more likely to appear in large cap space with the entire small cap space now effectively priced for QE ‘infinity’.  Long-term real money managers should keep this in mind too when starting to build new positions after a potential market pull-back.