Bill Gunderson

Since the market trough in March of 2009, the S&P 500 has risen from 666 to the 1928 level where it sits today. Propped up by the Fed, post the financial crisis, the market has nearly tripled. Other markets, not on “performance enhancement drugs” outside the U.S. have been left in the dust. While the U.S. market has been cruising at an average speed of 14.3% per year, the Emerging Markets (ADRE) have been crawling along at just 3.8% per year.

Data from Best Stocks Now app

But over the last 3 months, the pace of Emerging Market returns has accelerated.

Data from Best Stocks Now app

The tide appears to be shifting. The Fed is all out of stimulus. Quantitative easing is coming to an end and the Fed Chair has signaled that a quarter point rate hike is on the near-term horizon as signs of inflation rear their ugly head. This pending reality has helped bring the U.S. markets to a screeching halt.

The US Small Cap market (IWM) was up almost 40% last year, while this year it is in negative territory after eight months of very choppy action. In a complete reversal from last year, Large Caps are far outpacing Small Caps this year. This is a sign of the aging expansion of the U.S. economy.

It appears that the balance of power in the market is shifting and return seekers are reallocating their assets overseas. Last week, the S&P 500 had its worst week in two years and the Dow moved back into negative territory. The good news is that as a result of last week’s pull back in the U.S. the forward P/E of the average stock in my database has gone down to 16.8. This is the lowest reading all year. The U.S. market is now a little less expensive, but it isn’t cheap either.


Bill Gunderson

Bill Gunderson is the CEO and Chief Market Strategist of Gunderson Capital Managment in San Diego, CA. He is also a professional money manager, former research analyst, author of Best Stocks Now. http://www.pwstreet.com