Stock markets around the world have hit new record highs this year, but U.S. small cap stocks have yet to join the party.

As shown in the LPL Chart of the Day, the S&P 500 Index has outpaced the Russell 2000 Index, its small cap counterpart, over the past year.

That divergence has become especially apparent lately as the Russell 2000 has struggled to notch its first record high since August 2018. For context, the S&P 500 has posted 42 record highs since then, and the Dow Jones Industrial Average has reached 32 record highs.

Small caps were within 2% of an all-time high on January 16

Last week in our LPL Research blog, we took a closer look at how stocks have performed during an election year. We found that since 1940, the S&P 500 Index hasn’t been lower during an election year when an incumbent president has been up for reelection.

We’ve had many requests to look more into election years, so we thought we’d take another look at this impactful year.

The S&P 500’s track record for reelection years has been impressive, but its average path during these years has been quite interesting, as shown in the LPL Chart of the Day. In ten reelection years since 1950, the S&am

As the economic expansion caps its first decade, we thought it’d be a good time to check on LPL Research’s leading indicators in our Recession Watch Dashboard.

As you can see in our latest update and in the LPL Chart of the Day, the overall view hasn’t changed much. We believe we are in the later stages of this economic expansion, but we still see little threat of imminent recession. The current expansion is the longest on record, at 126 months, but the economy has grown at a slow and steady rate. We believe this measured pace, along with supportive fiscal policy, has contributed to this cycle’s continued

Earnings growth was largely absent in 2019, but we expect it to pick up in 2020. With stock valuations elevated, we think earnings hold the key to pushing stocks higher this year. We preview fourth quarter earnings season and share our thoughts on the outlook for corporate profits in 2020.

Off to A Good Start

Fourth quarter earnings season kicked off last week with 24 S&P 500 Index companies reporting fourth quarter results. The market’s reception to the first batch of results was mostly positive, particularly for several of the big banks. The percentage of companies beating consensus estimates (74%) and the averag