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Category: Equities

What a difference 9 years makes. On March 9, 2009, the market capitalization of Apple, Google (now Alphabet), Amazon, and Microsoft stood at $74 billion, $92 billion, $26 billion, and $135 billion. Their combined market cap: $327 billion. Data Source for all charts/tables herein: YCharts. 9 years later these four companies would grow to become the […]

Earnings, Stock Prices, and the Voting Machine

“The stock market is a voting machine rather than a weighing machine. It responds to factual data not directly, but only as they affect the decisions of buyers and sellers.”- Graham and Dodd, Security Analysis Earnings drive stock prices – so says investing lore. As earnings rise or fall, stock prices move higher or lower by […]

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Inflation! Deflation! Two words that strike fear into the hearts of investors. Are such fears justified? Let’s take a look… If we segment calendar year changes in the Consumer Price Index (CPI) into quintiles, we observe the following: The lowest equity returns have occurred in deflationary (quintile 1) and inflationary (quintile 5) environments. The highest […]

When Stocks and Bonds Go Down Together

High on the list of the greatest fears among investors is a scenario in which stocks and bonds go down together. Last week those fears were realized when the S&P 500 (SPY) suffered its worst week since January 2016 while long-term Treasury bonds (TLT) also declined. Source Data: Pension Partners, YCharts This was an unusual […]

Valuations and Bear Markets

U.S. equity valuations are high. How high? In January, the CAPE (Cyclically Adjusted P/E) ratio rose to 33.76. This is more than double the average historical CAPE Ratio since 1900. It is also higher than every period in history with the exception of the late 1990s on the way up (February 1998 onward) and early […]