03 Jan, 2021 07:45 am

No Predictions, But Some Thoughts On Where Markets Might Go In The New Year

No Predictions, But Some Thoughts On Where Markets Might Go In The New Year
Market Overview Analysis by Brian Gilmartin covering: S&P 500, US Small Cap 2000, SPDR S&P 500, US Dollar Index Futures. Read Brian Gilmartin's latest article on

In March, 2000, with that historic peak in the NASDAQ over 5,000, all the sectors and asset-classes that hadn’t done well for the prior 2 – 3 years, like small-caps, like non-US, like commodities just took off and really didn’t stop until 2007.Valuation is one reason—as one article updated last night shows—the Big 5 Tech names are expensive on a valuation basis, and P/Es could compress for the sector, but as Ed Yardeni showed over on his blog this year, Tech sector earnings in March 2000, were roughly 13% – 15% of the S&P 500 when the market cap weight peaked at 33% in March, 2000, while today, with Tech’s market-cap weight around 25% – 27% of the S&P 500, the earnings weight of the sector is in the low 20% range, so “earnings weight as a percent of market-cap weight” is much better “relatively” today than in March, 2000.When this post was written in November ’20 talking about this secular bull market’s long-term returns, a reader could probably (and safely) conclude that the current bull market in the S&P 500 is probably 60% – 65% through it’s secular bull.Secular bull markets typically last 15 – 20 years.

Summary / conclusion: If 2021 sees the S&P 500 lag some long out-of-favor asset classes like EM and non-US and small-cap or S&P 500 “equal-weight” RSP , don’t be surprised.In fact the September 2nd peak for the S&P 500’s largest tech components and subsequent outperformance of the Russell 2000 Russell 2000 , Emerging Markets, non-US, and commodities was similar to 2000, but smaller and less dramatic.

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