Very few people pay attention to the Russell 2000, its related funds including IWM, or other benchmarks of small-cap U.S. equities. Almost all of these peaked along with the Nasdaq during the first week of March 2014. However, the possibility that the Russell 2000 could have already begun a bear market is being ignored or dismissed by almost everyone, just as a similar divergence between the Russell 2000 and the S&P 500 had occurred on numerous past occasions as we were transitioning to a major bear market. The last time this happened was in October 2007, which was greeted by investors piling into U.S. equities just as they have been doing in recent months. Almost everyone loves to buy high and to sell low, so this should hardly be surprising. Believing that "it's different this time" is a dangerous conceit.
As for U.S. Treasuries and their related funds including TLT, these most likely peaked near the end of May when they reached their highest points in nearly one year. The bear market for U.S. Treasuries which began after these had achieved all-time peaks in July 2012 will likely not end until these revisit their lows from the early months of 2011, the last time that U.S. Treasuries had gone dramatically out of favor. Many who had sold short Treasuries have been covering their positions, because they can't bear to be on the wrong side of what appears to be an extended uptrend. These traders most likely bailed out just before their reasons for being bearish were about to be vindicated by favorable market action. The financial markets repeatedly act in whichever way will benefit the fewest number of participants at any time.
Emerging-market funds of all kinds had continued to experience all-time record net outflows through the past winter. These withdrawals have finally subsided, but very few investors have become interested in participating. As long as general U.S. equity indices were nearly all enjoying strong uptrends, very few people cared about potential alternatives. Now that small-cap equities have stopped climbing, instead of embracing the oversold and undervalued losers of 2013, or--gasp--actually selling stocks, most are simply shifting into outperforming large-cap stocks just as they had done in 1929, 1937, 1972, 1990, 2000, 2007, and numerous other past occasions when crowding into fewer and fewer rising assets eventually proved to be an unwise decision. Whenever large-cap stocks slide into corrections along with their small-cap cousins, a lot more investors will be eager to find assets which behave differently; some will buy the shares of commodity producers and emerging-market equities which had been so unpopular last year. If "boring" generic index funds are outperforming, then almost no one will consider anything else; however, as investors progressively realize that additional gains are highly unlikely for most baskets of U.S. equities, they will much more eagerly embrace assets which they normally wouldn't dream of buying.
Disclosure: In August-September 2013, and again during the first four months of 2014, I was aggressively buying the shares of emerging-market country funds whenever they appeared to be most undervalued. Since June 2013, I have added periodically to funds of mining shares and related assets especially following their most extended pullbacks. Starting in December 2013 I have been buying HDGE whenever it has traded below 13 dollars per share with the idea of selling it in 2016-2017 as we are completing the next U.S. equity bear-market bottoming pattern; HDGE is an actively managed fund which sells short various U.S. equities. From my largest to my smallest position, I currently own GDXJ, KOL, XME, GDX, SIL, COPX, REMX, EWZ, RSX, IDX, GXG, HDGE, ECH, GLDX, URA, VGPMX, BGEIX, VNM, ZJG (Toronto), PLTM, EPU, TUR, SLX, SOIL, EPHE, and THD. I recently sold all of my SCIF which had briefly become my fourth-largest holding, because euphoria over the recent Indian election is likely overdone. I have reduced my total cash position since June 2013 to approximately one sixth of my total liquid net worth in order to increase my holdings in the above assets. I sold almost 90% of my SLX near 49 dollars per share in November-December 2013 because steel insiders were doing likewise. I plan to buy more HDGE each time it drops below 13 dollars per share, because I expect the S&P 500 to eventually lose more than half of its current value--with most of that decline beginning during the second quarter of 2015 and extending into 2016 or 2017. The Russell 2000 Index failed to achieve a new all-time top since early March 2014 while the S&P 500 did so numerous times, in a classic negative divergence which previously occurred during October 2007. Those who have "forgotten" the lessons of the 2007-2009 bear market are doomed to repeat their mistakes.
