The graph below shows where to, historically, find out-performance given our likely position in the economic cycle. Some caveats of note to the generalized history shown. One is wise to consider both interest rate manipulation and behavioral factors stemming from and contributing to the extreme markets of the last 2 decades before blindly accepting this style and size equation. These factors give us reason to [...]
It is often very easy to fixate on the S&P 500 as if it were the only current proxy of the broad universe of stocks. Like the Dow Jones Industrial Average before it, the 500 has attained synonymy with stocks as it is the most widely publicized and recognized value. But just like the DJIA, the index has its own [...]
There are a great many difference between small cap companies (and their stocks) and large cap companies, especially mega cap (and their stocks). That in mind, investors predisposed toward the S&P 500 are rightfully watchful of the Russell 2000. While factors displacing the latter into a technical “correction” may be idiosyncratic, no one can deny the possibility of broader implications. [...]
If you go to the “fact sheet” for the Russell 2000 index trying to find the standard PE valuation metric, the only one provided by the index keepers is something called “P/E Ex-Neg Earnings.” The current valuation offered is 22.61, which sounds much more reasonable than the latest (April 25) raw PE estimate from the Wall Street Journal: 101.65. The [...]
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