Over the past 12 months there have been considerable changes taking place in stock consideration classifications. The most significant changes have taken place in the last 14 days.
Stocks trading in their normal Fair Value range, HOLD, has dropped from 66% to 53%. Roughly half of the total market is trading in their Fair Value range at the present time. Over the past 24 months the shift was from HOLD to SELL WATCH / SELL. This was occurring as investor expectations increased thereby pushing stocks above their Fair Value range. Over the past 14 days stocks have been moving from HOLD into BUY WATCH and
BUY. BUY WATCH has increased 9 percentage points to 10% of the total market. BUY has grown 4 points from 11% to 15%.
Investor expectations have moderated while earnings advanced producing a welcomed reduction in valuation pressures across the entire market. Relative valuations have moved just below Cautionary levels (120.0% Fv) at 119.1% Fv which is a generous reduction from last month.
Expectations continue to run high in the American markets, across all three market capitalization categories, and nearly every sector. USA bond markets continue to see deep colors of red as do international stocks and bonds.
Are the recent trade disputes the reason USA markets are “disappointing” investors? Why are investors saying they are disappointed? We are not sure really. As of Friday the total market is up 6.2% this year which is not far off of the long term average and very close to our estimate for 2018. Are the disappointments more in terms of what people thought could be obtained in 2018? This appears more likely. See the full report in Client Service > World Markets > Americas > USA Stock Consideration Report
Of the three major market capitalization categories SmallCap has advanced the most by adding 5.22 points to reach a positive 3.42% return after seeing red most of the year. MidCap has also added 2.47 points to put its head above breakeven at 0.44%.