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Daily Report : Lagging small-cap and discretionary stocks provide a weak warning

Jason Goepfert
2025-07-14
The S&P 500 recovered quickly from more than a -15% correction, but small-cap and discretionary stocks are among the largest laggards. Theory suggests those sectors should be leading a recovery, not lagging. But similar setups since 1926 were not successful warning signs for the rally, with one exception.
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Headlines

Lagging small-cap and discretionary stocks provide a weak warning: The S&P 500 recovered quickly from more than a -15% correction, but small-cap and discretionary stocks are among the largest laggards. Theory suggests those sectors should be leading a recovery, not lagging. But similar setups since 1926 were not successful warning signs for the rally, with one exception.

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Research

Lagging small-cap and discretionary stocks provide a weak warning

By Jason Goepfert

BOTTOM LINE
The S&P 500 recovered quickly from more than a -15% correction, but small-cap and discretionary stocks are among the largest laggards. Theory suggests those sectors should be leading a recovery, not lagging. But similar setups since 1926 were not successful warning signs for the rally, with one exception.

FORECAST / TIMEFRAME
None

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