However, we still think the economy will weaken in the second and third quarter. At this point, it appears the Fed is either at, or close to, the end of tightening monetary policy, inflation continues to abate, and long-term interest rates have topped out. While we calculate that the market is significantly undervalued, we also expect the markets are facing a rough road over the next few quarters. Mid-cap stock valuations are a little below the broad market average, whereas small-cap stock valuations remain exceptionally low, trading at a 33% discount. The core category is much less attractive relative to the broader market average as it remains closer to fair value.īy capitalization, large-cap stock valuations have moved to a hair above the market average based on their outperformance in the first quarter. Both value and growth categories remain undervalued albeit the growth category is much less undervalued than at the beginning of the year based on its outperformance for the year to date. exchanges, we calculate that as of March 23, the market was trading at a price/fair value of 0.88, a 12% discount to an aggregate of our intrinsic valuations.Īccording to our valuations, investors appear best positioned in a barbell-shaped portfolio by being overweight value and growth and underweight core. According to a composite of the 700-plus stocks we cover that trade on U.S. However, the market gave back almost half of those gains in February and March. Stocks surged in January, coming off deeply undervalued levels and a technically oversold market in December. Markets looking for a rebound in leading economic indicators to begin sustainable rally toward our fair value estimates.Deposit flight out of regional banks lowers their value, but this is not an omen of new financial crisis.However, expect a rough road ahead-tight monetary policy and decreasing credit availability will lead to economic slowdown.stock market trading at a discount to composite of our fair value estimates.
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