![As Small Caps Lag 20% Behind S&P 500, Reddit User Says Market Cap Definitions ‘Should Really Be Readjusted For Inflation’ – SPDR S&P 600 Small Cap Value ETF (based on S&P SmallCap Value Index–symbol–CVK (ARCA:SLYV), SPDR S&P 500 (ARCA:SPY) As Small Caps Lag 20% Behind S&P 500, Reddit User Says Market Cap Definitions ‘Should Really Be Readjusted For Inflation’ – SPDR S&P 600 Small Cap Value ETF (based on S&P SmallCap Value Index–symbol–CVK (ARCA:SLYV), SPDR S&P 500 (ARCA:SPY)](https://cdn.benzinga.com/files/images/story/2024/06/17/Wall-Street-ai6.png?width=1200&height=800&fit=crop)
In a recent discussion on Reddit, users are debating the necessity of adjusting market cap definitions to account for inflation.
This topic has garnered attention as small-cap value stocks lag significantly behind the S&P 500, underperforming by over 20%, as highlighted by Redditor AbuSaho.
The SPDR S&P 600 Small Cap Value ETF SLYV, representing small cap value stocks in the U.S., is down 8.31% YTD, while the broad U.S. equity market-tracking SPDR S&P 500 ETF SPY has gained 14.19% over the same period.
The Call For Change: Adjusting Market Cap Definitions
One Redditor argues that market cap definitions are outdated and should be revised to reflect the current economic landscape.
The key points include:
- Outdated Thresholds:
- Market cap categories such as small, mid, and large caps were established in a different economic context and have not kept pace with inflation. The traditional classification system may no longer accurately represent the size and economic impact of companies today.
- Need for Adjustment:
- The Redditor suggests revising market cap thresholds to better align with today’s inflation-adjusted values. They believe that this change could provide a more accurate representation of a company’s size and financial health, aiding investors in making more informed decisions.
Redditor ShadowLiberal said “the definition of a small/mid/large cap should really be readjusted for inflation,” citing his reasoning as to why small caps may be underperforming:
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