Rarely do R2000 upward revisions outpace downward ones as they are doing so today. The 25 prior instances are collocated into six distinct periods (Feb ’04 to Jun ’04 following the post-Internet Bubble low and Iraq War; May/Jun ’10 after the GFC shakeout; Jan-Mar ’18 following the Tax Cuts and Jobs Act passage; Aug ‘20-Mar ’21 following COVID’s low; Apr-Sep ’21’s rapidly rising inflation and Sep ’25 after Liberation Day).
High revisions ratio can lead to strong forward year returns as long as inflation remains tame. Forward year returns average 7% rising only 60% of the time vs. 11.5% and 74% for all periods. However, if you exclude the ’21 hyperinflation months, average returns are 16% and up 78% of the time. In many ways, forward returns from here may depend on what inflation does and how the Fed reacts. Given we believe inflation will not be an issue, we would expect the R2000 to post above average gains over the next 12 months.