7.4%
The rate of China’s economic growth in the first quarter of 2014, which was down from the fourth quarter but still beat forecasts.
(Source: Wall Street Journal)
The rate of China’s economic growth in the first quarter of 2014, which was down from the fourth quarter but still beat forecasts.
(Source: Wall Street Journal)
People projected by the U.S. Congressional Budget Office to buy policies through health-insurance exchanges by 2017.
(Source: Wall Street Journal)
Cases of Middle East Respiratory Syndrome, or MERS, confirmed by the World Health Organization since September 2012—of which 92 were fatal.
(Source: Wall Street Journal)
Every time the equity markets hit a new high, doubts begin to arise if the markets are getting too toppy/frothy. It is usually a good time to take a step back and put things in perspective. A good comparison is usually done by going back in time to when the markets peaked in March 2000. In that light, David Kostin, chief U.S. equity strategist at Goldman Sachs, looked at some data going back to March 2000 when the technology bubble peaked and subsequenty burst. I was really close to this time period, having moved to Silicon Valley to join a team doing late stage, pre-IPO, tech venture investing.
“Veteran investors will recall the S&P 500 and the tech-heavy Nasdaq peaked in March 2000. The indices eventually fell by 50% and 75%, respectively. It took the S&P 500 seven years to recover and establish a new high, but the Nasdaq still remains 25% below its all-time peak reached 14 years ago.”
However, according to Kostin, there are six ways in which the two episodes differ:
Recent returns are less dramatic. Although the trailing 12-month returns are similar (22% today versus 18% in 2000), the trailing 3-year and 5-year returns are much lower (51% vs. 107% and 161% vs. 227%, respectively).
Valuation is not nearly as stretched. S&P 500 currently trades at a forward P/E of 16x compared with 25x at the peak in 2000. The price/book ratio is 2.7x versus 6.Xx. The EV/sales is currently 1.8x compared with 2.7x in 2000.
More balanced market. The reason it is called the “Tech Bubble” is that 14% of the earnings of the S&P 500 came from Tech in 2000 but it accounted for 33% of the equity cap of the index. Today Tech contributes 19% of both earnings and market cap. Top five stocks in 2000 were 18% vs. 11% today.
Earnings growth expectations are far less aggressive. Bottom-up 2014 consensus EPS growth currently equals 9%, close to our top-down forecast of 8%. In 2000, consensus expected EPS growth equaled 17%.
Interest rates are dramatically lower. 3-month Treasury yields were 5.9% in 2000 vs. 0.05% today while ten-year yields were 6.0% vs. 2.7% today. The yield curve was inverted by 47 bp. Today the slope equals +229 bp.
Less new issuance. During 1Q 2000, 115 IPOs were completed for proceeds of $18 billion. In 1Q 2014, 63 completed deals raised $11 billion.
Kostin says based on historical patterns, momentum stocks are unlikely to rebound, but the broader market should still be set for modest returns going forward.
(Sources: Goldman Sachs, Business Insider)
The full-year operating loss reported by the crisis hit Co-operative Bank. The U.K.-based lender was hurt by souring loans and charges relating to misconduct and legal issues, and warned it won’t make a profit in 2014 or 2015.
(Source: Wall Street Journal)
The level of cash on U.S. corporate balance sheets continues to climb to record high levels. Company balance sheets are in great shape as management teams have become more conservative following the financial crisis. Should confidence improve, companies can put this cash to work via capital expenditures to boost organic growth or acquisitions. Companies could also return the cash to shareholders in the form of dividends or buybacks.
(Source: Brinker)
$11.8 million
J.P. Morgan Chase & Co. Chairman and CEO James Dimon’s 2013 compensation, according to the Securities and Exchange Commission—37% lower than the $18.7 million he collected the previous year.
(Source: Wall Street Journal)
$9 billion
Punitive damages faced by Takeda Pharmaceutical Co. and its marketing partner Eli Lilly & Co. after a U.S. jury decided that the drug makers hid the cancer risks of their Actos diabetes drug.
(Source: Wall Street Journal)
The chance of filling out the perfect bracket for the NCAA men’s basketball tournament this year, which ended Monday with Connecticut beating Kentucky 60-54.
(Source: Wall Street Journal)
Nigeria’s nominal gross domestic product in 2013, taking it past South Africa as the continent’s biggest economy.
(Source: Wall Street Journal)