There is an ancient Chinese curse that goes something like, “May you live in interesting times.” The events of the last week certainly qualify as such times. To recap the specifics of last week, I offer the following table:
Rather than lament periods such as this, it is useful to look for insights as to the potential course of the road ahead. Generally, that which suffers the least in a downturn is setting up to become the leadership of the next up leg in the market. A quick glance at the table highlights that the shares of smaller companies are holding up better relative to those of the larger ones. In addition, companies with a current valuation that can be characterized as ‘value’, rather than ‘growth’, appear to be holding up better as well. That last point is somewhat reinforced by the rising interest rate environment that historically favors value over growth. What is surprising, and certainly bears monitoring, is the performance of the foreign markets where developed markets have done better than the emerging markets. At the sector level, it may be too soon to draw conclusions. So far, those stocks that have experienced the strongest performance have the furthest to fall. We may be experiencing a reversion to the mean rather than a leadership rotation; we should have our answers soon enough. What we did not see last week was a return to the sort of risk on/risk off type of trading that has been the hallmark of the post crisis market. The market dreads the unknown, and it is clear we are moving into uncharted territory. However, when reading over the economic data from last week, the underlying strength is clear. The first quarter earnings reporting season, about which few are talking, begins in a week and should provide a solid counterpoint to the global theater.
For a PDF version of this publication, click here: 03.26.18_WeeklyMarketOverview
Source: All statistics herein obtained from Bloomberg.
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