Valuation – Molodovsky misapplied: the business cycle’s credit contraction isn’t over.equity ownership as equity markets are underappreciating risks to the following: As I’ve suggested for some time, risk-reward remains generally unfavorable to U.S. Large cap technology companies, which are benefiting from the pandemic (almost as if they were countercyclical), are now excessively overvalued and poised to drag down other sectors on a correlation event, which could be related to a number of risks. Even when considering that many stocks have performed negatively for the year (or even since mid-2018), equities generally remain expensive relative to where they sit in the business credit cycle. Since then, it’s been a bear market for the Russell 2000 and NYSE Composite.

Unlike the S&P 500 and Nasdaq Composite, many broad indices and non-technology sectors remain well below previous highs, some of which were marked in mid-2018. Performance dispersion within and amongst equity indices tells the ‘true’ story about U.S. Facts do not cease to exist simply because they are ignored (Aldous Huxley). It may not represent the views of Epsilon Theory or Second Foundation Partners, and should not be construed as advice to purchase or sell any security. This piece is written by a third party because we think highly of the author and their perspective.

Brave new world