IWF - Style Update: Where Are We In The Market Cycle?
2024-05-10 10:00:00 ET
Summary
- Industry P/E multiples are a staple in finance, but they fall short in capturing style regime rotation and may present a biased signal.
- The present retracement in relative valuation aside, growth remains richly priced, but far from unprecedented levels that may signal an immediate rotation to value.
- The retrenchment in the P/E multiple premium of growth relative to value may suggest the cycle has yet to reach its zenith, even if investors are anticipating that growth exhaustion and a value resurgence may be on the horizon.
By Ryan Giannotto, CFA
After a riotous first quarter of 2024, investors are now asking the $64 trillion question - where are we in the market cycle, and critically, is a style transition looming? There is a temptation to render snap judgements based on industry Price/Earnings (P/E) ratio multiples. However, I will argue that this method of assessing market valuation is incomplete at best, and may even afford a skewed perspective....
Style Update: Where Are We In The Market Cycle?