With the markets such a tangled mess these days, I continue to rely on important, long-term ratio charts to appreciate the big picture. Here, once again, is the Russell 2000 divided by the S&P 500, which suggests to me that small caps are going to be in for a rough ride for many, many months.
![slopechart RUT SPX](https://slopeofhope.com/wp-content/uploads/2020/06/slopechart_RUT_SPX-1-640x343.jpg)
The last time this happened, the pattern was well-formed but much smaller. It seemed weird to me that the point in the past corresponding to the point we are at now (analog-ish-ly speaking) was in the fall of 1997, well before the March 2000 peak. The small caps, however, had a tumble in store. I’ve marked the point (with a red oval) in 1997 where small caps were that equals where I think they are now. I think the much, much bigger pattern of today will make the move much more powerful, however.
![slopechart RUT](https://slopeofhope.com/wp-content/uploads/2020/06/slopechart_RUT-2-640x330.jpg)
Just to add another chart to the body of evidence, here is IWM (the small caps) divided by TLT (bonds), which is equally bearish.
![slopechart IWM TLT](https://slopeofhope.com/wp-content/uploads/2020/06/slopechart_IWM_TLT-2-640x330.jpg)