Signs of the Times
Despite the economic ‘Green Shoots’ we’ve been seeing and the sizable rebound that the equity markets have enjoyed since the March 9 lows, we still can’t get through a business publication without seeing a reference to the Great Depression. Certainly, we are not making light of the troubles faced by many Americans, but the official unemployment rate remains in the single digits and most economists are projecting stability and perhaps the return of economic growth later this year.
John Buckingham
The Upshot of Downside Capture
Last year was tough on practically all types of equities, and value stocks were unfortunately no real exception. This would seem to buck conventional wisdom that value stocks hold up better in downturns given the greater perceived “margin of safety” inherent in their less richly valued shares. Fact is, in most down markets value stocks do indeed hold up much better than growth stocks. However, in years when market declines are particularly severe, we see that value has been unable to provide its traditional safe haven.
Beauty from the Beast
The Chinese proverb (or curse), "May you live in interesting times," seems particularly appropriate to describe the environment for equities thus far in 2008. The major market indexes are all down substantially and our value-oriented strategy has experienced some of its worst performance since 2002. Equity price declines accelerated in June and July as rising fears about the health of the banking system and fallout from the housing bust continued to provide plenty of negative fodder for the headline writers. Of course, as history tells us, interesting times can create interesting investment opportunities.