Do Small Caps deserve a rotation?

Honestly, for the second quarter, according to FactSet, we are expecting S&P 500 earnings growth of 9.7%. For the Russell 2000, we expect to see a second quarter earnings contraction of 5.6%. That's not all, according to Jim Grant's Interest Rate Observer, for the trailing twelve months as of March 31st, Russell 2000 constituents generated an operating margin of 4.7%, while in aggregate, the membership of the S&P 500 posted an operating margin with a 13 handle. Additionally, also from Jim Grant, Russell 2000 components carry an aggregate net debt of 4.4 times trailing EBITDA, whereas the comparable number for the S&P 500 is 1.5 times. Food for thought.