So far, 79.4% of the S&P 500 have reported for Q4 2022. The current estimate for 2022 GAAP EPS is $174.69, and with year end close of 3839.50 leaves the 2022 GAAP PE of 23.36. Not cheap at all, and EPS trending worse, not better. So all this bullish talk is just that.
Absolutely the worst measuring stick for future returns. 🤑
So far, 79.4% of the S&P 500 have reported for Q4 2022. The current estimate for 2022 GAAP EPS is $174.69, and with year end close of 3839.50 leaves the 2022 GAAP PE of 23.36. Not cheap at all, and EPS trending worse, not better. So all this bullish talk is just that.
Absolutely the worst measuring stick for future returns. 🤑
EPS ex-energy down 9%. And yet the market rallied through it. market seems to be optimistic about the second half of the year. I suppose companies could have used the quarter to toss in all the problems they’ve been keeping on their books but that’s over.
4Q22 earnings season update from my @NewEdgeWealth colleague Jay Peters and using @FactSet and @TheTerminal data: - 60% of S&P 500 has reported - 70% beating EPS (vs 74% median) - Aggregate beat is just +0.6% (vs +8.6% 5 yr avg), lowest since 2008 - Revenues are +4%, but EPS is -5% due to 100bps of margin compression YoY - Ex energy, EPS -9%
“Most people like to believe that when they choose, say, a passive global equity fund, they have chosen something nicely diversified — a bit neutral even. It isn’t so. First they have chosen something very heavily weighted to the US: The MSCI World Index is nearly 70% made up of the US market, for example. They’ve also bought something very heavily tech based: 20% of the index is information technology, and the top three stocks (which make up nearly 10% of the entire world index) are all US technology companies. Diversified? Market neutral? Not even the tiniest bit.”
“In the technology bubble of the 1990s, passive investors were, as researchers at Cass Business School put it at the time, “effectively forced” to buy bigger and bigger stakes in overpriced companies. They were forced to do the same during the growth bubble of the last decade. This all reached nutty extremes in 2009 and 2021 (historians will refer to 2021 as our blowoff phase) with the biggest five stocks in the S&P 500 making up some 20% of its total.
The truth is that passive investing is simply momentum investing: Buy in and you get to hold lots of stuff that has done well recently (and the more overpriced they are, the more you hold) and not much of the stuff that hasn’t. That can be just fine — until conditions change. And change they have.”
But then again, we are x-number of days since the lows. ARKK is back. Inflation is dead. The Fed will cut in 2023. And Igy still has a 75 IQ. No, seriously.
“Most people like to believe that when they choose, say, a passive global equity fund, they have chosen something nicely diversified — a bit neutral even. It isn’t so. First they have chosen something very heavily weighted to the US: The MSCI World Index is nearly 70% made up of the US market, for example. They’ve also bought something very heavily tech based: 20% of the index is information technology, and the top three stocks (which make up nearly 10% of the entire world index) are all US technology companies. Diversified? Market neutral? Not even the tiniest bit.”
Look at how well the MSCI World ex-USA has underperformed the MSCI World. Probably better to be more heavily loaded with the US market. Japan has had 30 years of negative returns. I would not want the Nikei in my portfolio. The US market has performed magnificently over time. Since 1940 the market had had a great decade ever decade except the 2000s. The 2010s - close to 14% for the decade. Who would not want that?
“Most people like to believe that when they choose, say, a passive global equity fund, they have chosen something nicely diversified — a bit neutral even. It isn’t so. First they have chosen something very heavily weighted to the US: The MSCI World Index is nearly 70% made up of the US market, for example. They’ve also bought something very heavily tech based: 20% of the index is information technology, and the top three stocks (which make up nearly 10% of the entire world index) are all US technology companies. Diversified? Market neutral? Not even the tiniest bit.”
Look at how well the MSCI World ex-USA has underperformed the MSCI World. Probably better to be more heavily loaded with the US market. Japan has had 30 years of negative returns. I would not want the Nikei in my portfolio. The US market has performed magnificently over time. Since 1940 the market had had a great decade ever decade except the 2000s. The 2010s - close to 14% for the decade. Who would not want that?
"If we put words into the market's mouth, it's pricing in a soft landing and the Fed is near the end... We've been calling that the immaculate disinflation. That's not how it works."
Anything's possible, but "big picture, hard landing."
The people avoiding the high tech stocks are the ones missing out. Sure they are more volatile but they have produced incredible returns. $1,000 invested in MSFT in 1986 is worth $1.6 million today.
In 2001 AMZN was at 0.71 - less than a dollar - Now close to $120.
APPL was at 0.27 in 2001. Now it is up around $140.
TSLA had a rocky 2022 - but up 100%.
Tech stocks have made many very, very rich. Those avoiding them are missing out.
Your point is known and part of the problem, less obvious to investors is how the current decade unfolds. Odds are unlikely to map the last, even ignoring over valuation of tech stocks.
Your point is known and part of the problem, less obvious to investors is how the current decade unfolds. Odds are unlikely to map the last, even ignoring over valuation of tech stocks.
If you are a statistician and going on historical trends, odds are that this decade will be a good one.
The people avoiding the high tech stocks are the ones missing out. Sure they are more volatile but they have produced incredible returns. $1,000 invested in MSFT in 1986 is worth $1.6 million today.
In 2001 AMZN was at 0.71 - less than a dollar - Now close to $120.
APPL was at 0.27 in 2001. Now it is up around $140.
TSLA had a rocky 2022 - but up 100%.
Tech stocks have made many very, very rich. Those avoiding them are missing out.
We have been through this debate before. AMZN traditional business is a low margin loss leader, while AWS faces increasing competition. AAPL is not a growth company, maintains market share with built in obsolescence, small changes to smart phones, focus on services, and stock buybacks. TSLA gained early advantage in EVs with government subsidies, Elon hype, carbon credits, selling overvalued stock into investor enthusiasm, but in the end it is a car company facing increased competition in a saturated market.
You miss all of these things and more. Sally, you are doing just what everyone else does. A commercial for the financial services industry.
This post was edited 4 minutes after it was posted.
Your point is known and part of the problem, less obvious to investors is how the current decade unfolds. Odds are unlikely to map the last, even ignoring over valuation of tech stocks.
If you are a statistician and going on historical trends, odds are that this decade will be a good one.
EPS ex-energy down 9%. And yet the market rallied through it. market seems to be optimistic about the second half of the year. I suppose companies could have used the quarter to toss in all the problems they’ve been keeping on their books but that’s over.
4Q22 earnings season update from my @NewEdgeWealth colleague Jay Peters and using @FactSet and @TheTerminal data: - 60% of S&P 500 has reported - 70% beating EPS (vs 74% median) - Aggregate beat is just +0.6% (vs +8.6% 5 yr avg), lowest since 2008 - Revenues are +4%, but EPS is -5% due to 100bps of margin compression YoY - Ex energy, EPS -9%
I suppose the counter-argument is that markets probably actually tend to *rise* when EPS falls because that signals an imminent EPS expansion. because stocks will have already fallen.
In other words, the sequence is often
Stocks rise
stocks fall
EPS starts to drop (we are here now)
stocks start to rise in advance of EPS growth (or maybe we are here)
There’s no end to these articles telling us passive investing is over (usually sponsored by active managers of course) but by definition the average active manager will never beat the S&P@MerrynSW