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B400 Outperforms S&P 500 in Recent Spasm of Volatility

John A. PrestboJohn A. Prestbo

What goes up must come down. At least, that’s how the stock market has been behaving lately as it retreats from its all-time high in late January.

We thought it worthwhile to examine just how growth-at-a-reasonable-price—represented by the Barron’s 400 Index—has performed during recent volatility relative to many investors’ benchmark, the Standard & Poor’s 500. The short answer is quite well, though not perfectly, in three periods we put under the microscope. We found some familiar patterns, such as sectors that performed strongly in a rising market being among the hardest hit in the subsequent downdraft. We also observed some rarer performance incidents, such as a size segment that dominated throughout the market’s topsy-turvy swings.

The three periods we scrutinized were, first, a long, steady rise in stock prices, followed by, second, a market correction and then, third, a rebound. The start/stop dates of these periods were Sept. 18, 2017 (the day that current Barron’s 400 components took their place in the index in the most recent rebalancing) through Jan. 26 of this year, when the market hit its latest record high; the correction of Jan. 29 through Feb. 8, and the rebound of Feb. 9 through Feb. 23. Here is how the two indexes performed over the course of these periods:


The indexes lost half or more of their four-month gain in two weeks and then reclaimed about half of that loss in the two-week rebound (which then, after the study period ended, was largely swallowed in a four-day decline). Here is a table showing how the indexes performed in each of the periods, followed by a chart of the same thing that more clearly portrays the relative magnitude of these moves:

Percentage Change of Median Price
9/18/17 to 1/26/18 1/29/18 to 2/08/18 2/09/18 to 2/23/18
Barron’s 400 16.20% -9.26% 5.51%
S&P 500 14.79% -9.92% 5.91%


The Barron’s 400 rose more than the S&P 500 in the first period and declined slightly less in the correction. But the S&P 500 drew ahead of the Barron’s 400 in the rebound, probably because big investors were buying S&P 500-based instruments to ride the recovery of that period.

A small portion of the Barron’s 400’s outperformance in the first two periods, as well as its underperformance in the third period, can be attributed to its total lack of utilities among its components. Utilities hurt the performance of the S&P 500 in the first two periods and helped it in the third. The Barron’s 400 never has held many utilities because their typical debt loads hold down their MarketGrader financial-fitness scores, which are used to select companies for the index. Instead of one or two, the Barron’s 400 currently has no utilities. The sectors with the most components are consumer, discretionary; financials and industrials.

Here is a table showing the performance of 10 sectors in the three periods we studied:

Percentage Change of Median Price
9/18/17 to 1/26/18 1/29/18 to 2/08/18 2/09/18 to 2/23/18
B400 S&P 500 B400 S&P 500 B400 S&P 500
Consumer Discretionary 18.57% 16.76% -8.56% -9.36% 3.27% 4.65%
Consumer Staples 17.60% 6.38% -7.03% -8.94% 4.18% 2.37%
Energy 9.87% 23.27% -10.56% -14.46% 0.52% 3.99%
Financials 18.90% 15.09% -6.31% -9.40% 5.58% 6.29%
Health Care 8.94% 13.98% -11.55% -11.30% 7.41% 5.06%
Industrials 18.37% 16.87% -9.04% -9.76% 5.93% 5.86%
Materials 16.52% 20.42% -12.23% -12.13% 4.11% 6.62%
Technology 18.54% 17.14% -10.95% -9.99% 8.22% 9.60%
Telecommunications 14.96% 1.94% -10.62% -10.38% 6.89% 3.23%
Utilities N.A. -5.60% N.A. -7.79% N.A. 6.21%

The S&P 500 energy sector was the biggest gainer in both indexes during the first period, and unsurprisingly was the hardest hit during the correction. The sector that came through all three periods with the largest gain was Barron’s 400 financials. It ended with a median-price increase of 18.2%, which was the leader in both indexes, mainly because it declined the least during the correction. Technology, which ranked third among gaining sectors in the first period, took over leadership in the third period with the largest advances in both indexes.

Size-segment analysis shows that the very largest companies with mega capitalizations of $10 billion or more maintained their market leadership, despite correction-sized declines in the second period. Here is a table showing the performance of size groupings:

Percentage Change of Median Price
9/18/17 to 1/26/18 1/29/18 to 2/08/18 2/09/18 to 2/23/18
B400 S&P 500 B400 S&P 500 B400 S&P 500
Mega Cap (>$10 billion) 20.39% 15.24% -10.31% -9.77% 7.85% 6.01%
Large Cap ($3 bln-$10 bln) 18.90% 7.82% -8.94% -11.09% 4.02% 5.20%
Mid Cap ($1 bln-$3 bln) 12.16% N.A. -8.26% N.A. 5.24% N.A.
Small Cap ($500m-$1 bln) 9.38% N.A. -8.38% N.A. 5.16% N.A.
Micro Cap (< $500 mln) -9.29% N.A. -11.52% N.A. 3.19% N.A.

Large-cap stocks are not performing well for the S&P 500, ending these three periods with an advance of less than 2%. They outpaced the Barron’s 400 segment in the third period, however, though that was probably partly a reaction to the drubbing they took during the correction.

Sudden onslaughts of volatility can shake up not only investors but also the inner makeup of the market. At such times it is usually instructive to look under the hood to see what is changing—and what isn’t.

John Prestbo, senior advisor to MarketGrader Capital, was formerly editor and executive director of Dow Jones Indexes. He was also chairman of the Dow Jones Index Oversight Committee. During his time at Dow Jones Indexes he worked, along with Barron's and MarketGrader, on the development of the Barron's 400 Index. Prior to that, Mr. Prestbo worked as an editor and writer for The Wall Street Journal in various capacities, including page-one editor, commodity news editor and markets editor. Mr. Prestbo has co-authored or edited several books over the past 30 years. The most recent was "The Market's Measure: An Illustrated History of America Told Through the Dow Jones Industrial Average," published by Dow Jones Indexes in 1999 and "Barron's Guide to Making Investment Decisions" which he helped to compile and edit in 2006. Mr. Prestbo won the University of Missouri Award for Distinguished Business Writing in 1967 and the George M. Loeb Achievement Award for Business Writing in 1968. In 2007, he won the William F. Sharpe Indexing Lifetime Achievement Award. That same year, he was honored for his leadership by Dow Jones Indexes during its celebration of 10 years as a separate business unit.

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