Bloomberg Intelligence's 'Equity Market Minute' 05/06/2020

The video discusses the recent rise in small cap stocks amid skepticism due to the poor economic climate. It highlights the impact of the Fed's announcement to purchase corporate credit, which benefited small caps. Historically, small caps have outperformed large caps after major peaks in credit spreads. The video also analyzes the valuation gap between small and large caps, noting that small caps are trading at a significant discount. The conclusion emphasizes the potential for this gap to close if economic conditions improve.

What recent action by the Federal Reserve has influenced small cap stocks?

• Increasing taxes

• Purchasing corporate credit

• Raising interest rates

• Selling government bonds

Historically, how have small cap stocks performed relative to large caps after major peaks in corporate credit spreads?

• Underperformed by 1200 basis points

• Performed the same as large caps

• Underperformed by 500 basis points

• Outperformed by more than 1200 basis points

What is the potential outcome if corporate spreads continue to tighten?

• Large caps will outperform small caps

• The valuation gap between small and large caps may close

• Small caps will underperform in the long term

• The economy will enter a recession

What does the enterprise value relative to sales ratio indicate about small cap stocks?

• They are overvalued compared to large caps

• They are trading at a 35% premium to large caps

• They are trading at a 35% discount to large caps

• They have the same valuation as large caps

How does the current valuation of small caps compare to historical averages?

• Below long term average by two standard deviations

• Above long term average by two standard deviations

• Above long term average

• Equal to long term average