“Imagine for a moment that a portfolio manager describes their investment process as follows: they focus exclusively on companies with deteriorating or questionable business prospects, and lots of debt. They go on to highlight their fondness for companies that make poor use of invested capital, and experience large selloffs during periods of stress, said Jonathan Golub, chief equity strategist at Credit Suisse, in a Tuesday note.
The subsequent spate of positive vaccine developments has driven investors into shares of smaller and more indebted companies at the expense of firms with more robust finances, reflecting how stocks that missed out on early gains from the equity rally that followed last March’s sharp plunge at the onset of the pandemic, were now playing catch up, as the chart below shows.
The Energy Select Sector SPDR exchange-traded fund XLE, +1.49% is up 17.5%, surpassing the 3.9% gain in the broader S&P 500 benchmark SPX, -0.14% since the start of the year.Read: What a small-cap ‘breakout’ means for a stock market trading near all-time highsBelow investment-grade debt with the lowest credit ratings have enjoyed strong gains in January, opening up issuance for even the junkiest of bonds.
S&P P/E before crashes Sep 1, 1906 13.60 banking crisis Sep 1, 1929 20.17 asset bubble Jul 1, 1933 26.27 2nd wave Apr 1, 1971 19.6 QE spending Jul 1, 1987 20.81 Black Monday Apr 1, 1999 34.00 dot com Dec 1, 2007 22.35 banking crisis Feb 9, 2021 39.86 today AH