It’s been one of the worst years on record for diversification, with our hypothetical All Asset No Authority (AANA) portfolio down 7.2% YTD through yesterday. That’s the second-worst year for AANA since 1972, and there’s probably not enough time left for performance to undercut 2008 (-24.9%) for the bottom spot.
The recent move by the S&P 100 Index (OEX) above its historic March 2000 high prompted us to take a closer look at the turnaround potential of this perennially underperforming Mega Cap index. Remember, a Large Cap leadership cycle has been in force since April 2011—with the trend strengthening the last few months. What are the prospects for the biggest of the Big Caps?
BACK TO THE MEDIANS (1957 To Date): S&P 500 13% Downside
The S&P 500 gained 4.3% (price only) in February. Based on the 1957-to-date valuation metrics presented below, the S&P 500 has 13% downside to its historical average. The S&P Industrials (which excludes Utilities and Financials) now has 26% downside to reach mean valuation.