"Morgan Stanley's Stephen Roach, one of the world's leading economists, says the oncoming U.S. recession will dwarf the dotcom slump in its magnitude."
At the same time, the people who run the middle east sovereign wealth funds are saying in Davos that US financials and real estate are at bargain basement prices. Real estate is a real asset, and inflation is rising, so it's hard to see how it can keep falling in price.
On financials: take a look at financials as a % of the S&P 500. They accounted for an above average % until recently, so again, I think the trend of financials shrinking as a % of the S&P will likely continue for a while.
Regarding small caps, they outperformed for so long until recently that the real question is how long the outperformance of large caps will go on for. My guess is that small cap value stocks tend not to be exporters, and that means they're strongly exposed to the declining dollar.
So your view of small cap value stocks should be linked to your view of the dollar.
Under the Radar News - Monday [View article]
At the same time, the people who run the middle east sovereign wealth funds are saying in Davos that US financials and real estate are at bargain basement prices. Real estate is a real asset, and inflation is rising, so it's hard to see how it can keep falling in price.
Four Opportunities for 2008 [View article]
Four Opportunities for 2008 [View article]
Don't Underestimate the Durability of Market Trends
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Regarding small caps, they outperformed for so long until recently that the real question is how long the outperformance of large caps will go on for. My guess is that small cap value stocks tend not to be exporters, and that means they're strongly exposed to the declining dollar.
So your view of small cap value stocks should be linked to your view of the dollar.