After spending two months in discount territory, in March the Ratio of Ratios headed closer to its historical median premium of 4%.
Our current view is the lift-off will be December or later. Assuming inflation will pick up and the Fed hikes the rate by the end of 2015, stocks will perform relatively well, with international stocks a better bet than U.S. stocks.
The recent strength in the dollar coincided with a spike in volatility and weakness in risky assets, but the relationship over the last couple years has been tenuous at best.
Small Cap Premium Bounces Back To 23%
Small Caps are selling at a 20% valuation premium relative to Large Caps (23% last month), using non-normalized trailing operating earnings.
Small Caps are close enough to a new relative strength high that it’s possible a final revision might be necessary before the Small Cap tide flows out.
Small Cap Premium Continues Upward To 23%. Large Caps Lead On The Downside In January
The investment leadership of a given year has historically had better-than-even odds of outperforming in the following year at both the asset class and equity sector levels.
Small Cap Premium Continues Upward To 21%. The red-hot equity market of 2013 was especially good for Small Caps with a +38.8% total return.
Small Caps are selling at a 20% valuation premium relative to Large Caps, using non-normalized trailing operating earnings.