Are You Worried About An Overvalued Market?

seekingalpha10-16

Concerns about market overvaluation are misplaced; investors can find value beyond technology stocks, particularly in small caps, which are starting to shine.Despite Nvidia's high and ASML's lowered ...

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investors can find value beyond technology stocks, particularly in small caps, which are starting to shine.Despite Nvidia's high and ASML's lowered ...</p>\n\n<a href=\"https://seekingalpha.com/article/4727078-are-you-worried-about-an-overvalued-market\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"NDX","symbol_name":"纳斯达克100指数","start_time":0,"source_url":"https://seekingalpha.com/article/4727078-are-you-worried-about-an-overvalued-market","article_id":"2475191218","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1299802292/image_1299802292.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2475191218","pubTimestamp":1729084458,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"Concerns about market overvaluation are misplaced; investors can find value beyond technology stocks, particularly in small caps, which are starting to shine.Despite Nvidia's high and ASML's lowered g","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"NDX":"纳斯达克100指数"},"translate_title":"你担心市场估值过高吗？","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"NDX":0.9},"content_text":"Concerns about market overvaluation are misplaced; investors can find value beyond technology stocks, particularly in small caps, which are starting to shine.Despite Nvidia's high and ASML's lowered guidance, the Russell 2000 outperformed, indicating a rotation that will likely continue.Valuation metrics are poor predictors of future performance; small caps' recent outperformance suggests resilience in the economic expansion and bull market.Ignore doom and gloom; focus on where future returns will be, as small caps are poised to score a touchdown by 2025.wildpixel/iStock via Getty Images One day after market darling Nvidia (NVDA) hit a new all-time high, reports surfaced that the government is considering limiting the amount of AI chips it can sell, along with other chipmakers, to certain countries. Then ASML Holding N.V. (ASML), which is Europe's largest tech company, lowered its guidance for 2025. Those were great excuses to take profits in technology stocks, and the sector weighed heavily on the major market averages, except for the more domestically focused small-cap index. The Russell 2000 rallied as much as 1% before closing with a small gain in a rotation that, I think, will continue. Days like yesterday exacerbate concerns that the market is overvalued, but I think those concerns are misplaced, as investors can find plenty of value if they look beyond technology. Finviz The bears warned us about an overvalued market at the beginning of this year, when the S&P 500 was trading at a trailing price-to-earnings ratio of 22, which was in the 92nd percentile for the past 20 years. Yet, the correlation between forward returns and the P/E ratio was near zero over that time frame, as this year obviously proves that, with the index up more than 20%. Valuation is a horrible metric for forecasting future performance, especially when it is one sector that is growth-oriented, commanding nearly one-third of the index's weighting responsible for the elevated ratio. Bloomberg Adding fuel to the flames of concern over valuation, a Bank of America investor survey gave a rare \"sell signal\" this month when cash levels in global portfolios fell to 3.9%. There have been 11 such signals since 2011, which makes this development sound relevant, but the average decline in global equities following its trigger was just 2.5% one month later and an even less relevant 0.8% after three months. That barely defines a pause to refresh, and it would be a buying opportunity in my mind. Bloomberg In May of this year, I shared the chart below, recommending investors favor small caps (IWM) over the technology sector (QQQ). That wasn't a popular call, as the Magnificent 7 had been powering the bull market gains since its birth in October 2022, but this is where I felt valuations were becoming an issue for future gains. It was not a situation where I felt the tech sector was exhibiting bubble characteristics as much as earnings needed to grow into very expensive price-to-earnings multiples. That process is ongoing, but small caps, which have had half the return they normally produce two years into a bull market, are starting to shine. Bloomberg If investors choose to be tactical, they need to learn to start throwing passes in front of the receiver if they want to score. In other words, temper the temptation to invest where the best returns are today. Instead, take aim at where they will be tomorrow. The Russell 2000 Index has now outperformed the Nasdaq 100 over the past six months, and I think that outperformance will continue. This looks like a completed pass, and I think small caps will score a touchdown in 2025. StockCharts  This rotation and outperformance for small caps also speaks volumes about the resilience of both the economic expansion and bull market. Small caps do not outperform at the top of a bull market, nor do they do well when on the cusp of an economic downturn. To the contrary, it is just the opposite. There is a steady drumbeat of doom and gloom across all forms of financial media. I'd recommend listening to the market and ignoring the doom and gloom.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"1","news_tag":"analysis","news_rank":0,"symbols":[],"gpt_button":0},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.0","shortVersion":"4.29.0","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2475191218"}