How Quants Got Bullied

With a few giant companies dominating the market, money managers who buy thousands of stocks have lost out

- Pat Regnier and David Rocks

In a crisis, large companies can have an edge. As the pandemic has forced the shuttering of local stores and restaurants, grounded consumers streamed Tiger King on Netflix, stocked up on groceries and supplies with Amazon, and gathered together on Zoom. Hardly any company is immune from the economic shutdown, but the big ones have more resources to weather the pandemic and, in some cases, may be able to gain market share.

On Wall Street, that’s exacerbating a divergence between small and large companies which has been frustrating stockpickers for some time. The Russell 2000, a benchmark for small companies, has lagged the big-name S&P 500 index badly over the past two years. This year the small stocks, with a median market valuation of about $525 million, have lost 22% as of April 28; the S&P, about half of that. The Nasdaq 100, which tracks the largest tech stocks, is down less than 1%. The S&P 500’s companies now make up 82% of the entire U.S. stock market’s value, a share that’s been steadily rising this century.