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Looking Back, Looking Forward – 2022Q3

November 21, 2022

Those latest earnings forecast, are implying an economic soft-landing, not an outright severe recession. Historically, the SP500 EPS change during a recession was a decline in the high teens. That said, with the SP500 losing nearly a quarter of its value YTD, investors clearly have embraced less robust prospective earnings than what the consensus estimate is suggesting. […more]

Looking Back, Looking Forward – 2022Q2

July 21, 2022

Looking Back and Forward Recap of 22Q2: During the 2nd quarter, US equity markets lost 17% of their value, with comparable declines between the Large and SMID market capitalizations. Underpinning the big declines are: 1) accelerating inflation, 2) lost confidence in the Fed’s ability to tame inflation, 3) growing fear that a US recession, or worse long-lasting stagflation is inevitable. […more]

Looking Back, Looking Forward – 2022Q1

April 25, 2022

First released 4-6-2022 Recapping the quarter: Looking back at the first quarter of 2022, January was largely a traditional risk-off month when the SP500 index lost nearly 10% of its value by January 27, driven […more]

Looking Back, Looking Forward – 2021Q4

February 6, 2022

Looking back: both the US economy and corporate America earnings were much stronger in 2021 than initial expectations.

Looking forward: Equities will likely face volatility in the months ahead, however, higher interest rates are not a death spell to the equity market. Higher interest rates are good for the US economy right now, and what is good for the economy will eventually be good for corporate America.

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Looking Back, Looking Forward – 2021Q3

October 12, 2021

Looking into the next couple of quarters, we expect US economic growth to remain strong. Consumers’ balance sheets remain in great shape and more workers will be returning to the labor force. Purchases delayed due to supply constraints or availability issues will likely be pushed to 2022, resulting in more even economic growth rates in 2021 and 2022, rather than showing a big fall off next year as previously expected. […more]

Looking Back, Looking Forward – 2021Q2

July 16, 2021

Corporate America is chugging along and reporting strong earnings. For the SP500 index, 87% of its members have reported actual 21Q1 EPS above estimates, well above the five-year average of 74%. In aggregate, SP500 companies’ […more]

Looking Backward and Forward – Q1 2021 Review

April 9, 2021

We stressed in our 20Q4 newsletter that over longer time horizons, since the mid-90s, Large and Growth factors have not consistently generated alpha. This observation was quickly proven true YTD, as Large and Growth significantly lagged Small and Value. While those traditionally defined style factors are helpful in explaining short-term performance, we believe in the long term, it is valuation that delivers alpha. […more]

Looking Backward and Forward – Q4 2020 Review

January 11, 2021

Incorporating the latest 10 Yr US Treasury yield into our market derived discount rate calculation, the Equity Risk Premium (ERP) per our estimates, is currently at ~6.8% for nonfinancial US firms in nominal terms, significantly higher than the historical median and average of ~4.5%. With the risk free rate historically low, equity investors seem to be demanding a fair amount of protection, though the market appears overvalued despite the high ERP. […more]

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