From my broker, based on Goldman research:
One notable feature of this yearâs 25% rally in the S&P 500 has been its broad-based nature. 446 constituent stocks are up year-to-date, the highest number since 1980, of which 220 are up more than 30%. Whilst past stock markets bubbles have been characterised by fashionable sectors rising to ludicrous valuations, such as during the dot-com rally of 2000, current valuations are spread evenly across the market.
At the peak of the curve in 2000, frothy dot com stocks meant that valuations within the index were widely dispersed from the average. At the current point in the curve, valuations are more tightly bunched around the average than at any time since 1990. As such, the current market value can be interpreted as the most broad-based in 23 years.
A broad-based market doesnât necessarily offer any insight as to whether current valuations are high or low, however. What it says is that there is less differentiation of companies based on valuation, such that companies with different growth forecasts are being valued with similar multiples. As such, either growth stocks are undervalued, or value stocks are overvalued.
Whatever the case, the tightly clustered valuations of todayâs market makes it an ideal hunting ground for single name stock-pickers.
One notable feature of this yearâs 25% rally in the S&P 500 has been its broad-based nature. 446 constituent stocks are up year-to-date, the highest number since 1980, of which 220 are up more than 30%. Whilst past stock markets bubbles have been characterised by fashionable sectors rising to ludicrous valuations, such as during the dot-com rally of 2000, current valuations are spread evenly across the market.
At the peak of the curve in 2000, frothy dot com stocks meant that valuations within the index were widely dispersed from the average. At the current point in the curve, valuations are more tightly bunched around the average than at any time since 1990. As such, the current market value can be interpreted as the most broad-based in 23 years.
A broad-based market doesnât necessarily offer any insight as to whether current valuations are high or low, however. What it says is that there is less differentiation of companies based on valuation, such that companies with different growth forecasts are being valued with similar multiples. As such, either growth stocks are undervalued, or value stocks are overvalued.
Whatever the case, the tightly clustered valuations of todayâs market makes it an ideal hunting ground for single name stock-pickers.
