Asset Class Valuations 2024 UPDATE
December 19, 2024: We update an asset class yield analysis first published in 2021. Since that time, we have seen dramatic changes in the valuation of some assets, most notably U.S. equities.
Equity Market Concentration – What Comes Next
November 1, 2024: Large cap stocks are extremely concentrated even beyond simple measures of the weight of the largest few stocks. Historically, levels of concentration to this degree have subsequently seen strong outperformance among smaller stocks within the large cap universe. Equal weighted indexes also subsequently do well, but equal weight indexes themselves can suffer from lower quality. For longer term investors, this analysis supports our view that there is great opportunity to invest in the higher quality parts of the market with a bias away from the largest and most expensive stocks.
5 Years In: Our Small/Mid Cap Quality & Value Strategy
May 10, 2024: March 31st marked the 5-year anniversary of the Distillate Small/Mid Cap Quality & Value strategy. We summarize its performance record since inception here.
Are Small Stocks Really Cheap? It Depends
February 27, 2024: This one pager examined whether small cap stocks are as cheap as is often touted. The high percentage of unprofitable stocks is significantly distorting traditional PE calculations for small cap indexes, but there seemingly are many excellent values to be had in this segment of the market by being selective and using accurate valuation measures.
Small Stocks, Big Debt Issues
October 1, 2023: Small stocks have big debt burdens and high borrowing costs and interest expense could rise further as debt is refinanced in the current, higher, interest rate environment. This incremental expense is likely to be a significant headwind for many small cap stocks.
Concentration Risk (2023)
May 27, 2023: The largest five stocks in the S&P 500 collectively have increased in value this year by $2.8 trillion, which is 49% above where they began the year. The level of concentration in the S&P 500 as measured by the over-24% total weight of just these five stocks is greater than it has ever been.
Equity & Bond Valuations & Inflation
May 21, 2022: Amid an uncertain economic future, equities offer an attractive advantage of being able to pass through inflationary costs over the longer-term, but their present relative valuation against bonds does not seem to fully capture the benefit as it did historically.
Concentration Risk
The largest 5 stocks in the S&P 500 Index accounted for 22% of its value at the end of last month vs. under 12% five years earlier. In this one-pager, we look at how rising relative valuations were the predominant driver of this shift.
Asset Class Valuations in a Historical Context
June 15, 2021: Amid apprehensions about current valuations and their impact on prospective returns, we look at cash yields for various asset classes over time and relative to one another.