Time to check in on stock valuations. After providing our assessment of stock market fundamentals, sentiment, and technical conditions over the past few weeks, this week we turn to the last piece of our investment process: valuations. Here we will make the case that stock valuations are reasonable, despite above-average price-to-earnings (PE) ratios.

Valuations Have Come Down

Before making the case that stocks are fairly valued, we want to first point out how far valuations have fallen in recent months. Our favorite valuation tool for stocks, the PE ratio, has seen a falling “P” and a rising “E.” The S&

The U.S. economy grew at 2.3% in the first quarter, better than the consensus estimate of 2.0%, but a slowdown from the near 3% growth of the prior three quarters. Persistent problems with seasonal adjustment of first quarter data and a lull in consumer activity after some spending was pulled forward in the fourth quarter, likely due to post-hurricane recovery and anticipated tax gains, all weighed on first quarter growth. We continue to expect U.S. growth to accelerate over the rest of the year as these temporary factors roll off, with a strong job market, fiscal stimulus, and global demand providing potential support for consumer and busine

The yield curve has continued to flatten; however, because rates are rising simultaneously, it is a less ominous indicator for the economy relative to if yields were falling. Here are two ways in which the yield curve can flatten:

A bear flattener is an environment in which rates rise across the yield curve, but short-term rates rise more so, leading to a flatter yield curve.

A bull flattener is an environment in which rates decline across the yield curve, with long-term rates declining more, also leading to a flatter yield curve.

The bull and bear distinction reflects whether the move is good or bad for bonds, th

There are several market myths related to certain market indicators which have the tendency to distract investors from what really matters in assessing market opportunities. We believe the overall fundamental backdrop is currently quite positive thanks to solid economic growth and strong corporate earnings trends, while market sentiment and technicals continue to suggest future equity strength. This week we will bust some common market myths.

Myth 1: The Yield Curve

The yield curve has flattened throughout 2018, causing some to fear that a recession may be right around the corner. This makes sense, as the past nine recessions