Sunday, September 4, 2016

September 2008 Deja Vu

There was a massive rotation to "defensive" yield, and simulataneous short-covering in small cap growth, the most beaten down sector...

Massive short covering

S&P / R2K ratio with small cap value (black):

Barron's Sept. 3rd, 2016
The No-Growth Stock Rally
"92% of the rally over the past four years can be traced to one driver—the collapse in “equity risk premium,” which is the excess return investors demand from stocks over government bonds. This surplus premium that investors demand to justify the risk of owning stocks has shriveled as bond yields plummeted and central banks cut interest rates to zero and below."

In other words, it hasn’t mattered much that earnings for Standard & Poor’s 500 companies peaked in 2014 and have stagnated since...Investors desperately seeking yield have had to buy (U.S.) stocks.

"Yield", "utilities", "staples", "smart beta", "dumb beta", "low volatility", "risk parity":