Written by Horizon Investments, LLC.

Equities rallied for the third week in a row, building on their strong performance in May.

Despite headline-grabbing S&P 500 performance — which is now down only about 1% on the year — international equities led the charge higher last week [Figure 1]. Emerging markets returned 7.8% (MXEF), but international developed markets weren’t far behind (MXEA +7.1%). Domestic equities lagged, up “only” 5.0% last week (SPX).

Graph by Horizon Investments, LLC

Value, small caps lead as momentum rolls over

The potential for a rotation in market leadership that we’ve been flagging looks like it’s finally here. Optimism around a faster restart is causing investors to bottom fish in the more beaten down areas of the market. Domestically, value led growth last week by over 300 basis points (bps) and small-caps (RUT) beat large-caps (SPX) by a similar margin [Figure 1].