Stocks Analysis by Callum Thomas covering: . Read Callum Thomas's latest article on Investing.com
Thanks to a 17-year Bear Market in global shares ex-US, an intriguing set of valuation extremes has opened up and may well be presenting a major harbinger for global investors in the coming years. The chart below shows our relative value indicators for small caps vs large caps, value vs growth, and global vs US stocks .
All 3 have reached extreme cheap levels, and collectively are at the lowest point since the dot-com bubble. This should be ringing alarm bells due to the parallels to the peak of the dot com bubble — but also providing cause to pause and think about what the next big multi-year investment themes might be.Here’s an interesting extension to the chart above, in this case looking at absolute valuations rather than relative valuations, and the combined absolute value score for all three flavors on each side of the chart above ., the last time it reached this level was during the late-stages of the dot com bubble, and more recently at the peak of the pandemic stimulus frenzy. Risk managers take note!— this is positive because you can get bullish or bearish rotations . So far this is looking bullish... but to explain:bullish rotation is where one plays catch up to the other thing, and helps drive the index higher. Bearish rotation is when the previous leader falls and the laggard catches up, but the index either stagnates or falls because the laggard is not big enough to outweigh the losses of the larger previous leader.glad is when relative performance is positive while absolute returns are also positive; sad is when relative performance is positive but absolute returns are negative .of starting cheap, turning up, and then gaining momentum. So this helps provide some further context and clarity on both the risks and opportunities building up in global equities.This chart came from my “12 Charts to Watch in 2024“ . It shows the relative performance line of GSV vs ULG, and it highlights 2 important elements to round out this week’s themes. First, it puts on display the magnitude and relentlessness of that 17-year long relative bear market in GSV vs ULG . But second, the technicals: the trend is not your friend, at least not yet. Also, after a promising period of consolidation and attempt at turning the corner, it actually broke down to new lows. That’s the thing with looking for turning points like this, it actually has to turn first. So to really raise conviction on this emerging opportunity/risk, we do need to see technical confirmation, and I am actively monitoring for that and I think it is safe to say that Topdown Charts clients will be the first to know!Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks. Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes.and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website. It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
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