Looking Beyond a Top-Heavy Market: Four Areas for the Future
Looking Beyond a Top-Heavy Market: Four Areas for the Future
Wednesday 04 December 2024
Investment Talks
Looking Beyond a Top-Heavy Market: Four Areas for the Future
November 2024 | Underneath the surface of today’s concentrated US equities market, sharp earnings recoveries may soon play out and structural and cyclical changes may create new winning and losing stocks. Although the market is mostly ignoring the valuation risks, we have seen signs that this market imbalance may be ready to unwind. Notably, a higher-than-average amount of S&P 500 returns is explained by company-specific factors rather than macro factors, and valuation dispersion is also high. For active managers, the key is not just to identify pockets of value, but paths to future value through revenue and earnings growth.
01 | Over the past two years, we saw a small portion of the US equities market, including the Magnificent Seven, dominate returns.
02 | This dominance is beginning to equalize as earnings growth from the top stocks slows and the rest of the market accelerates, a process we expect to continue into 2025.
03 | Meaningful structural changes are occurring across many industries, presenting active investors a range of potential opportunities across several key areas. Impacts from the recent US presidential election could also catalyze these shifts.
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