The Value Trap of 2015
Source: Bloomberg and Todd Asset Management. Data as of 10/30/15. Performance from 12/31/14 through 10/30/15. Thirds of S&P 500 are approximately equal numbers of stocks, equally weighted
The best third of stocks in the S&P 500 has outperformed the worst third by a wide margin so far in 2015. Most of the leading stocks are much more expensive than the laggards.
Investors don't trust valuation measures and are seeking assured growth.Expensive stocks with stable estimates have led, while inexpensive stocks with declining estimates have lagged.
Earnings pressure due to the dollar strength and decline of oil related capital spending has clocked value stocks. Earnings should stabilize as these pressures diminish over the coming quarters. As this occurs and the Fed indicates a more normal economy with a rate hike, we expect the value vs. growth performance gap to close.
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