Dissecting the U.S. Equity Market
This commentary takes an in-depth look at the U.S. equity market.
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Valuations of Small-Cap Equities
Small-cap equities have thrashed large caps over the last two years. While the performance disparity between small and large caps is already significant, the small-cap rally may still have some legs if history serves as a useful guide. Investors should maintain exposure to both small and large caps, rebalancing among both the capitalization sectors and…
Aftermath of the Venture Capital Bubble
Reviews investors’ concerns of capital overhang and interim valuations, and highlights that investors should keep in mind that downturns are part of the nature of this asset class, and this one comes on the heels of an unprecedented upswing.
The Rise and Fall of the S&P 500
Over the course of the 18.25-year bull market, more than half of the market’s capital appreciation was driven by inflation and the decline in interest rates, and another 20% by multiple expansion, leaving only about 20% of the appreciation attributable to real earnings growth. Between March 31, 2000 and March 31, 2002, inflation continued to…
Earnings Recovery
Despite the persistent fall in equity prices, analyst expectations of S&P 500 earnings remain quite optimistic. Historical precedent suggests that earnings could well rebound within the time horizon envisaged by analysts, but are unlikely to prove as robust as they expect.
U.S. TIPS – Evolution, Valuation and Implementation
As the title suggests, this report examines changes in the TIPS market since their first issuance in 1997, as well as implementation issues for institutions seeking either the inflation- or deflation-hedging features of TIPS.
Mother Goose Revisited
If Goldilocks were the presiding genius of the fabled new economy of the roaring nineties, Humpty Dumpty may be more appropriate to the current situation. All the Fed’s horses and all the President’s men are working to put the U.S. economy back together again, but their conventional tools may prove inadequate.
Earning Projections
Due to the consistent upward bias of analyst projections, investors should exercise caution in valuing equities on the basis of forward earnings expectations.
Writing Down Current U.S. Equity Valuations
The disparity among market commentators and analysts in their assessment of market valuations is unusually high today. Although our analysis suggested that the sharp price decline following September 11 brought the U.S. equity market close to fair value, the subsequent rise in the market and our closer analysis of the aggressive earnings assumptions required to…
A Snapshot of the U.S. Economy and Capital Markets
The economy and capital markets were heading decidedly downward before the terrorist attacks intensified the public’s overall feeling of uncertainty and risk. While the post-September 11 panic selling has subsided, markets are still pricing in considerably higher risk premiums than existed prior to the terrorist attacks. This increase in risk-aversion affects economic growth and corporate…