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A Bird's Eye View Blog

Fireside Charts: Record Sector Valuations, Small Caps Fail to Keep Up, and a Look at Bonds During the SARS Epidemic

By:BCM Investment Team | Date:Feb05, 2020 | Category: Equity, Economics, Market Highlights, Fireside Charts

Despite ongoing coronavirus fears (or perhaps because they've finally been offered some relief—thanks Gilead Sciences!), stocks rebounded yesterday, leading the S&P 500®  Index to its best day in nearly six months. 70%+ of the S&P 500  sectors are at record valuations—a higher percentage even than during the tech bubble—but a look at the index's five largest companies tells a different story on value. Are we failing to see the forest through the trees? Small caps continue to lag their larger cohorts and are currently posting a 15%+ gap in relative performance. Meanwhile, hopeful signs on manufacturing continue to roll in, with ISM Manufacturing PMI beating expectations and crossing the threshold into growth territory after its recent stint in contraction. And while the Eurozone Markit Manufacturing PMI has failed to do the same, it at least looks to have stabilized and started to establish some upward momentum. And much has been made of how the coronavirus compares to the SARS epidemic—can a look back to 2003 give us any insight on what to expect from the bond markets?

1. Historic... or a historic concern?


S&P 500 sector record valuations

Source: Crescat Capital, from 2/4/20



2. As the comparisons of this market versus the late 1990's mount, a historical comparison of valuation may be helpful.


S&P 500 biggest stocks valuations

Source: WSJ Daily Shot, from 2/5/20



3. As the mega-caps get bigger, the rest of the market is being "left behind"...


small and large cap comparison

Source: WSJ Daily Shot, from 2/5/20



4. The sum of the regional Fed surveys did not disappoint! Now, how much damage will the coronavirus cause?


ism manufacturing pmi

Source: WSJ Daily Shot, from 2/4/20



5. While still in contraction mode and virus aside, it looks like the worst is over for Europe's manufacturing recession.


markit eurozone manufacturing pmi

Source: WSJ Daily Shot, from 2/4/20



6. With the hopeful news that there may be a coronavirus "cure," a comparison to the SARS epidemic and the bond market reaction pre and post is in order. Is a bond sell-off coming?


bond market SARS epidemic

Source: WSJ Daily Shot, from 2/5/20



7. The PBOC injected another $240 billion into their economy overnight giving at least some respite for most stocks and commodities...


comex copper

Source: WSJ Daily Shot, from 2/4/20



8. Personally, I'm a huge fan...but I can't stop thinking parabola up, parabola down...


Tesla market cap

Source: WSJ Daily Shot, from 2/4/20





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Disclosure: The charts and info-graphics contained in this blog are typically based on data obtained from 3rd parties and are believed to be accurate. The commentary included is the opinion of the author and subject to change at any time. Any reference to specific securities or investments are for illustrative purposes only and are not intended as investment advice nor are a recommendation to take any action. Individual securities mentioned may be held in client accounts.