Market Sense
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Recent rotation has helped resolve some of U.S. large cap stocks’ valuation excesses, but risks remain to the downside for U.S. multiples. Large cap growth’s sales multiple is still near its all-time high, at about 6X, and growth’s earnings multiple may still be at least 15% too rich to value….
After outperforming for most of the last three years, growth stocks have been struggling relative to value stocks since October of last year. However, the broad indices may be masking a longer-term shift in the styles’ performance. Pure style indices and a look beyond large caps both suggest the growth…
Elevated fiscal spending, easy monetary policy, trade tensions and geopolitical strains may imply inflation risk is re-emerging in 2026. This could take consensus views, focused more squarely on potential job losses as AI-initiatives are implemented, off guard this year. Materials and energy are two of the top performing sectors in…
U.S. equity markets’ rotation out of technology has come a long way over the last few months, and the sector is now trading at just a 10% premium to the rest of the market. The sector’s earnings may justify a modest premium to the index, but only if growth can…
U.S. large cap stocks ended 2025 in rare valuations territory, with the cyclically adjusted PE ratio (CAPE) of 39.9 in the 99th percentile of all observations since 1881. US stock valuations by this measure are near 150-year highs, well north of the long-term average of 17.7, and even substantially higher…
Metals prices are breaking records so far in 2026, hitting new all-time price highs and recording rates of price change last touched in 1979. Back then, prices rose until higher interest rates and a painful recession emerged. This time, gold might continue to run until geopolitical stability or an effort…
The FOMC paused rate cuts in January, with stabilizing labor markets and inflation pressures offering little reason to ease more at the current time. They didn’t need to ease more to stay easy anyway – after three consecutive declines in the benchmark rate in late 2025 the Taylor rule suggests…
International equities meaningfully outperformed US stocks last year, but the value of holding non-domestic stocks extends well beyond returns. Critically, correlations among markets have been falling and dispersion of returns between regions has been rising as well, elevating the diversification benefit of international stocks. As geopolitical and trade risks continue…
Domestic growth themes based on policy support and regulatory reprieve have largely driven equity market rotation out of tech and toward other sectors in the US equity market in recent months. Renewed geopolitical turmoil and some disappointment on the domestic policy front now threatens to upend the party in 2026. …
