Bloomberg quantified the obvious. It wrote “inexpensive stocks are historically cheap, trading near their deepest discounts in the past two decades, when inspecting bottom line valuations against metrics like price to EBITA, price to sales and price to productive assets.”
Anyone who is a value investor already knows this painful point as the performance difference between value and growth is at historical levels.
Many will argue it is the massive influence of passive investing that has created today’s environment. Recent data suggests over 55% of assets are in passive vehicles where price discovery is not required. Monies are allocated based upon size where the big get bigger in a rising market.
Indexing has gone from a strategy to the strategy.
It also suggests in any prolonged selloff, the big may get smaller at a faster rate than its smaller capitalized brethren.
Last week was the worst week in the S & P 500 since October. As previously noted, eight of the eleven S & P 500 sectors were higher, an anomaly. Is this a discrepancy a harbinger of things to come given the massive difference between value and growth?
Moines will ultimately gravitate to the sectors that have the highest potential reward and the least amount of perceived risk.
Yesterday was a $22 billion 30-year Treasury auction, an auction that was met with “solid” demand as it appears the benchmark was cheapened up enough to elicit interest. Tuesday’s 10-year auction was met with “lackluster demand” and bond prices declined.
Equites were quietly mixed. The Dow was up about 0.1% while the NASDAQ declined about 0.6%.
Today the PPI and retail sales are released. How will the data be received?
Last night the foreign markets were mixed. London was down 0.07%, Paris up 0.87% and Frankfurt up 0.27%. China was down 0.18%, Japan up 0.29% and Hang Seng down 0.71%.
Dow and NASADAQ futures are 0.20% and 0.4%, respectively, ahead of the data. The 10-year is off 1/32 to yield 4.19%.
