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Valuations

Oct 05 2018

The Two-Tiered Global Market

  • Oct 5, 2018

We should emphasize that our characterization of stocks as dangerously overvalued applies only to the U.S. market.

Oct 05 2018

Estimating The Downside: The G-Rated Version

  • Oct 5, 2018

The longevity of this bull market is impacting tactical asset allocators in ways great and small.

Sep 08 2018

S&P 500—Valuation Check-Up

  • Sep 8, 2018

In late January we speculated how long it would take for the S&P 500’s bloated valuations to reach more reasonable levels. The S&P 500 now trades back where it was in January and the seven-month break included some of the best growth rates most have ever seen. We found ourselves asking: Did chubby Mr. Market shed any pounds as he pedaled away on his stationary bike?

Sep 08 2018

Fondly Remembering The Year 2000...

  • Sep 8, 2018

Many equity investors have suggested there’s no comparison between today’s expensive market and the bubble peak of Y2K, pointing out that today’s Technology titans are “real companies” with massive revenue underpinnings.

Sep 08 2018

Beware The Breakout

  • Sep 8, 2018

The S&P 500 finally erased the losses from its nine-day swoon in January and February.

Aug 07 2018

Assessing The Correction

  • Aug 7, 2018

How do today’s cyclical conditions stack up with those accompanying other stock market declines? 

Jul 07 2018

An Old Chart Whose Time Has Come?

  • Jul 7, 2018

No, it’s not a 1990s-like love affair with the stock market. But it’s surely a sign of the times when TV pundits seem to have dropped even passing references to valuation when spinning their mostly bullish market yarns.

Jun 29 2018

Emerging Markets: Down A Lot, But Not Really Cheap

  • Jun 29, 2018

The stock market liquidity squeeze we’ve discussed this year hasn’t played out quite like we expected. Traditionally, Fed tightening and slowing money growth hit Small Caps earlier, and harder, than the blue chip stocks...

Jun 22 2018

Altitudes Are Too High— And Attitudes Are Getting There

  • Jun 22, 2018

An important feature of this bull market—and a reason for its longevity—is the slow recovery in investor attitudes relative to valuation altitudes...

Jun 07 2018

Is The Bull Just Napping?

  • Jun 7, 2018

Old age has certainly put no limitations on the bull’s exploits, so we should be cautious in reading too much into its meandering recovery path. However, it’s possible that action since the February low is not a recovery process but rather a countertrend bounce within a larger downtrend.

Feb 07 2018

Multiple Contraction—Just A Little Patience?

  • Feb 7, 2018

Things were bigger when you were a kid. Like that enormous sweatshirt your aunt gave you for your birthday or that hand-me-down ten-speed bike with the cross bar taller than your shoulders.

Feb 07 2018

Most Likely Just A Correction

  • Feb 7, 2018

So, what happened to the January Barometer—the old analyst’s maxim that a market gain in January portends a gain for the full year?

Jan 06 2018

Estimating The Upside?

  • Jan 6, 2018

The remarkable stock market breadth and momentum chronicled in these pages doesn’t come without a price.

Dec 07 2017

Value: Scarcer Than In 2000

  • Dec 7, 2017

Comparing current valuations to March 2000 is unfair to March 2000. Any Value or Small Cap manager from that era can attest that values became more plentiful as the S&P ascended into its narrow peak.

Dec 07 2017

The Many Faces Of Mo

  • Dec 7, 2017

Momentum is one of the most widely accepted alpha-generating factors, used by quantitative and fundamental managers alike. Its biggest drawback, however, is high turnover. Herein we explore momentum from the perspective of sector weights.

Nov 07 2017

The Case Of The Disappearing Value Premium

  • Nov 7, 2017

Market history teaches us that investors behave differently in groups than they do as individuals.

Nov 07 2017

Small Cap Valuation Check

  • Nov 7, 2017

We don’t have a strong capitalization-bet recommendation, other than to remind readers that Small Caps have been especially responsive to the favorable seasonal window that began November 1st (and which extends through April 30th).

Oct 06 2017

Valuation-Based Country Selection/Rotation

  • Oct 6, 2017

Despite cyclicality, over the longer term, investing in lower valuation countries ekes out better performance in an EM portfolio, and Dividend Yield showed the most consistency in terms of value factor effectiveness.

Oct 06 2017

Dialing In On Downside Risks

  • Oct 6, 2017

Question: Your “Estimating The Downside” section shows the S&P 500 would lose 26% if it reverts to its 1957-to-date median valuation level. The downside estimate for the S&P Industrials Index, however, is almost -40%. Why such a huge difference?

Oct 06 2017

How To Double Your Money In Ten Years

  • Oct 6, 2017

Before the markets punish an irresponsible act, they must first reward it.

Sep 08 2017

A Harbor In The Tempest

  • Sep 8, 2017

Our Major Trend Index (MTI) recently fell from “positive” toward stocks to a “neutral” reading, leading us to trim bullish equity positions in our tactical portfolios.

Aug 05 2017

Valuation-Based Country Rotation: EM Vs. DM

  • Aug 5, 2017

Many studies have evaluated momentum factors for over/underweighting country exposures within a portfolio, but few have considered valuation factors for country rotation within the Emerging Market space.

Jun 07 2017

A Contrarian “Late-Cycle” Play?

  • Jun 7, 2017

The Amazon Effect masks both the underperformance of the average Discretionary stock and the relative value that’s been reestablished across the sector. “Discretionary ex-Amazon” is a better contrarian pick than Energy.

Apr 07 2017

Global Valuation Checkup

  • Apr 7, 2017

Foreign equities beat the U.S. in the first quarter, but the performance gap that’s opened up since the 2007 market highs remains astounding. While foreign equity valuations (especially within EM) have rebounded from February 2016 lows, the bounce has done little to close the enormous P/E discounts relative to the U.S. market.

Apr 07 2017

The Valuation “Time Clock” Revisited

  • Apr 7, 2017

Based on a median of six measures, today’s S&P 500 valuation profile equates to the one prevailing on August 31, 1997. From there, the S&P 500 rallied >60% over the next 2 1/2 years before peaking. However, the same can’t be said of valuation readings for the “typical” or median stock.

Apr 07 2017

What’s Ailing Small Caps?

  • Apr 7, 2017

While the Russell 2000 loss during the 2015-16 correction was almost double that of the S&P 500, the decline did not fully erase the P/E premium Small Caps have enjoyed since the middle of last decade. The premium might need to be entirely erased before a multi-year Small Cap leadership cycle can begin.

Mar 07 2017

Estimating The Upside: Another Angle

  • Mar 7, 2017

A look at the potential upside for the median S&P 500 stock, based on the theory that each of four valuation ratios reaches its individual all-time high set during the last phase of the 1990s’ market mania.

Feb 07 2017

Trump Inherits Poor ‘Initial Conditions’

  • Feb 7, 2017

We think that stocks in Trump’s current term will fall short of Obama’s gains, mostly reflecting a valuation starting point that’s almost twice as high as Obama’s was. “Managing expectations” doesn’t seem like Trump’s style, but in the case of the stock market it might not be a bad idea.

Feb 03 2017

Apologizing in Advance for Trump

  • Feb 3, 2017

While Wall Street is extremely well represented in the new administration, we doubt that Wall Street’s performance under Trump will come close to that enjoyed under Obama.

Jan 07 2017

An Obligatory Rant Over High Valuations

  • Jan 7, 2017

We remain cyclically bullish, but it would be intellectually dishonest to try to make a serious valuation case for the stock market here.

Jan 07 2017

Safety In Numbers?

  • Jan 7, 2017

The S&P 500 closed the first week of January at a new cycle high, up 9.2% from the pre-election low made on November 4th.

Jan 07 2017

“Changes In Attitudes, Changes In Latitudes”

  • Jan 7, 2017

The above caption—and Jimmy Buffett song title—comes from the “View From The North Country” section in the first-ever Green Book published in November 1981. Not much has changed in 35 years.

Nov 05 2016

Has The Fed Already Hit Stocks?

  • Nov 5, 2016

One never appreciates what he or she has until it’s gone. In our case, during the many years it was freely available, we failed to appreciate the zero interest rate. Now that it’s gone, we already feel pressured to join a game where we (and very few others) have any edge: Fed-watching. Our real edge is that we recognize this.

Oct 14 2016

Small Caps: Growing Into Their Valuations

  • Oct 14, 2016

Fed tapering of its QE3 asset purchase program ended two years ago this month, yet we don’t believe this episode has received appropriate recognition for the role it’s played in the relatively flat stock market environment that’s followed the onset of tapering in January 2014.

Oct 07 2016

Low Quality Stocks Dominate

  • Oct 7, 2016

Investors brushed off a global economic slowdown and drove up the value of risky assets. Current low-quality leadership has been in place for eight months thus far.

Oct 07 2016

Foreign Equities: Cure For Altitude Sickness?

  • Oct 7, 2016

When we complain about the stock market’s inflated valuation levels, we’re unintentionally giving short shrift to the 50% of the global-market capitalization that resides outside the U.S. We’d be hard-pressed to describe the valuation of Developed foreign markets as any higher than neutral.

Oct 07 2016

Beta Rotation Underway

  • Oct 7, 2016

For months we’ve speculated that any major extension of the bull market would require a rotation into High Beta groups from the Low Volatility and economically-defensive themes that were the market’s big winners from mid-2015 to mid-2016.

Oct 06 2016

Dependence On Initial Conditions, Valuations And Forward Returns

  • Oct 6, 2016

A client inquiry led us to take a fresh look at the relationship between current valuations and subsequent stock market returns, which is a regular feature in our Benchmarks publication.

Sep 08 2016

Same Ponds, Different Fish?

  • Sep 8, 2016

The impact of atypically-high current valuations has become a challenge for style-box investing. High quality, mature dividend payers have habitually resided in the Value and Blend boxes, but investors have bid up those valuations as they look for alternatives to low bond yields.

Aug 05 2016

Divergence Among Quality Factors

  • Aug 5, 2016

Performance and valuation of the three Quality factors are diverging. From a valuation standpoint, we might see a reversal in performance, with the Stability factor weakening and the Leverage factor strengthening.