Today in the podcast, we have updated thoughts on sectors, sentiment, and small caps. Three big things you need to know:
• First, S&P 500 Tech sector valuations have room to run, while EPS and revenue revisions have turned slightly positive – supporting our continued overweight on the sector.
• Second, the body of our sentiment work continues to suggest fear has been approaching potential peak levels, but falls short of providing US equity investors with an all-clear.
asts continue to anticipate a:
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Takeaway #1: S&P 500 Tech sector valuations have room to run, while EPS and revenue revisions have turned slightly positive – supporting our continued overweight on the sector.
™s. Previously, we started in:
o Tech is middle of the pack vs. other sectors, slightly above it’s LT average on a relative forward P/E but not egregious.
o Something that’s been jumping out to people in our conversations is that it’s Consumer Discretionary that looks most expensive right now within the S&P 500.
o That’s not distorted by any one stock as our stats are based on unweighted medians. But it’s worth noting that Consumer Discretionary looks undervalued within Small Cap.
o Putting valuations aside and getting back to Tech, what we notice on our revisions works is that Tech and Industrials are the only two sectors with positive revisions on both revenues and EPS
right now. That’s a big change for Tech which was in negative revision territory most of last year.
Moving on to Takeaway #2: the body of our sentiment work continues to suggest fear has been approaching potential peak levels, but falls short of providing US equity investors with an all-clear.
o Things that make the stock market look most interesting from a contrarian perspective:
• AAII net bullishness at -28%, below -10% is a buy signal w/a 15% forward return on avg on a 12 month basis.
also returned to the highs of:
hich has been on par with Dec:
watching CFTC data on Russell:
e after returning to its late:
t stock market performance in:
• By contrast, Growth stocks (which were the epicenter of the Tech bubble) stabilized after the Worldcom bankruptcy, which helped a lengthy bottoming process in the broader market start.
asts continue to anticipate a:
• While it’s possible Wall Street simply hasn’t updated it’s models yet, we find it striking that economic forecasts in particular are not reflecting an uptick in recession expectations for the US …
nvironment to be contained in:
quality trade in the Russell:
• as well as the Russell:
nto our brain is that Russell:
s sense to us given that the R:
er baking in that anticipated:
That’s all for now. Thanks for listening. And be sure to reach out to your RBC representative with any questions.
