Outlook The S&P 500 Index is a broad representation of the 500 largest stocks and is known as a large-cap market index. The lesser-known S&P 600 is a broad representation of the next 600 largest stocks and is known as a small-cap market index. Over the past 5 years, as the Magnificent 7 and other very large stocks rallied, the S&P 500 (large-cap stocks) has outperformed the S&P 600 (small-cap stocks) by approximately 46%.1 And while this may continue for some time given the enthusiasm about the growth potential of the largest companies, the valuation of large-cap stocks is now a bit on the high side given a trading level of 23x price-to-next year's estimated earnings. Meanwhile, small-cap stocks trade at a significantly lower 15x next year's earnings. The enthusiasm and higher valuation are largely based on the amount of earnings growth potential that large companies have relative to smaller ones. Specifically, the weighted-average expected earnings growth rate of large-cap stocks stands at 13%. However, this is not excessively higher than that of smaller companies at 11%.2,3 So, while many investor portfolios are populated heavily with large household names, it may make sense to 1) be mindful of the idea that well-known great companies can become excessively expensive and therefore risky, and 2) keep an eye out for attractively valued but lesser-known opportunities. . . . Stock futures as of Monday morning move higher in the green as the market attempts to gain back some of the dip from late last week. The market slid on Thursday and Friday to finish the week in the red. The S&P 500 and Nasdaq Composite slid 1.66% and 2.51% respectively, while the Dow Jones Industrial Average tumbled 2.51% marking its worst weekly performance since October. On Friday alone, the S&P 500 and Dow both finished down 1.7%, while the Nasdaq shed 2.2%. While the market tumbled in the prior week, the broader indexes we follow still remain within 4% of their record highs. The declines came after a few weak economic outlook data points and less optimist guidance for company-specific earnings raised concerns over the state of the U.S. economy and consumer spending. In the prior week, the Purchasing managers’ index (PMI) showed the U.S. services sector drifted into contraction territory in February, while the U.S. manufacturing sector advanced further into expansion territory. The overall U.S. composite output index remained above the 50-point level, coming in at 50.4, indicating further expansion. However, the report cited deterioration in future sentiment as primarily a reflection of “increased uncertainty about the business environment, especially in relation to federal government policies related to domestic spending cuts and tariffs. Worries over higher prices, and broader geopolitical developments were also noted.”4 Another widely followed consumer sentiment index report released by the University of Michigan came in weaker than expected. Consensus from the roughly 500 consumers surveyed pointed to uncertainty regarding the expectation of continued inflation and possible tariff-induced price increases.5 The week ahead will highlight other key readings on the economy, including economic growth [Gross Domestic Product, (GDP)] and an updated read on inflation [Personal Consumption Expenditures (PCE), the Federal Reserve’s preferred inflation gauge]. The market will also receive quarterly earnings from many influential companies, specifically Home Depot, Lowe’s, and chipmaker Nvidia. | 
