10k Words | December 2024
Apparently, Confucius did not say “One Picture is Worth Ten Thousand Words” after all. It was an advertisement in a 1920s trade journal for the use of images in ads on the sides of streetcars...
The smallest stocks - "nanocaps" - have had a terrible CY2024 in both the US and Australia. The valuation "jaws" between large and small have dramatically widened since 2020. In Australia trading activity in smaller companies has finally started to recover in 2024. The “Magnificent Seven” have been central to the strong returns and earnings growth for large caps but the rest of the market needs to contribute more going forward. Interestingly, Morningstar’s value analysis indicates the US market remains less overvalued than Australian equities - but it is the UK that looks undervalued. Sentiment indicators remain at extremely positive levels, accompanied by record inflows into US equity funds. Yet private equity is having to hold on for longer. Finally, Goldman charts the data-driven surge in power demand.
CY2024-to-date median US equities performance by industry group and market cap size
Source: GuruFocus
CY2024-to-date median Australian equities performance by industry group and market cap size
Source: GuruFocus
Forward EV/EBITDA of small & large cap US ETF portfolios
Source: Koyfin
Year-on-year change in the value of trade in the S&P/ASX Emerging Companies Index (3m trailing and 12 month trailing values year-on-year)
Source: Iress, Equitable Investors
Earnings growth of the “Magnificent Seven” v. the rest of the S&P 500
Source: JP Morgan Asset Management
Share price performance of the “Magnificent Seven” relative to the S&P 500; small caps v. large caps; value v. growth; defensive v. cyclical; minimal volatility v. the overall market
Source: Barclays
Rolling 6 month correlation between gold and other asset classes
Source: World Gold Council
Price/Earnings varies significantly across regions
Source: Barclays Private Bank
Morningstar fair valuation estimate of the Australian equities market
Source: Morningstar
Morningstar fair valuation estimate of the US equities market
Source: Morningstar
Morningstar fair valuation estimate of UK equities
Source: Morningstar
Percentile of sentiment indicators (data since 2007)
Source: Goldman Sachs
Monthly net flows into US equity funds ($US billion)
Source: EPFR via @RealJimChanos
Share of US buy-out-backed companies by holding period - private equity having to hold longer
Source: Lombard Odier
Data demand growth driving a surge in data centre power use
Source: Goldman Sachs Asset Management