Small Business Stressed, so are Small-Caps

April 30, 2015
By Vlad Karpel

I was talking to my good friend Joe Cusick from MoneyBlock about the overbought nature market. Joe immediately starts telling me how stressed small business owners are in his Chicago neighborhood. He tells me about a gentleman who has owned a small grocery/convenience store in the neighborhood for over 20 years, and the last four months have been the worst that he can remember. He tells me about the Dry Cleaner, a Turkish immigrant, who has built 2 successful stores in the city, is now struggling to hold on to his business as well. He is trying to understand how the hell (those were his words) this market is staying up.

Wow, the market is hitting all time highs but small business owners are struggling to stay above water, what gives? The consumer is what gives and while Joe’s story is an unscientific test, it could be a symptom. Small-Caps ($IWM) are down -1.01 percent, Consumer Staples ($XLP) down -.90 percent, Health Care ($XLV) down -.91 percent, and Consumer Discretionary ($RCD) down -.98 percent.

The pull back in consumer spending is real and if it does manifest we could see potentially deeper damage to large-cap and small-cap stocks.  I do not see market weakness manifest itself yet, but the Canary is not chirping. If Small-Caps ($IWM) start to break this market will be tested.

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