Rising Valuation Multiples The US stock market had an especially strong year, with the broad indices up roughly 30% on a total return basis. As discussed in previous commentaries, the rise in the market was more due to multiple expansion and less due to earnings growth. In fact, the S&P 500 started the year with a trailing twelvemonth price/earnings multiple of 16.5x and it rose to 21.6x by year-end. This 30% multiple expansion mirrors the 30% market appreciation almost exactly. In other words, there was a dramatic increase in what…

Posted by David Tillson in January 2016 - Fourth Quarter Commentary This quarter’s letter was initially designed to take a slightly somber tone of “2015 was a little rocky, but not too much damage was done.”  However, given the inauspicious start to 2016, a different focus is clearly in order.  Just to put 2015 to bed, the market, depending on your definition, was essentially flat.  The Russell 1000 and S&P 500 Indexes were up approximately 1% while their growth and value constituents showed plus 5% and negative 4% returns, respectively.  Major…

Posted by David Tillson - Second Quarter Commentary                          July 2015 The second quarter was another essentially flat quarter for the U.S. stock market as investors tried to make some sense out of all of the headlines and data flows that hit news outlets daily. Economic growth remained tepid, and while some of this was weather related in the first quarter, it is now clear that our current economic weakness has other causes. One of the larger headwinds for companies is…

Posted by David Tillson 2014 Second Quarter   For the past two quarters we wrote that our expectations for stocks’ 2014 performance would fall in the 8% to 10% range. With the more than respectable performance of 5% for the second quarter, we are now close to that full year target. The stock market has moved ahead despite persistent doubts about the strength and longevity of U.S. economic growth, numerous geopolitical problems, and the nearing of the end of the Fed’s support for low interest rates. More than a year ago the…

Posted by David Tillson 2014 First Quarter   For the first quarter of 2014, stocks continued their upward rise, albeit at a more muted pace than in 2013. Our expectation has been and continues to be that the market’s 2014 full year performance will most likely fall in the 8-10% range and that its complexion, like last year’s, will continue to favor actively managed portfolios that concentrate on the fundamentals of companies. However, we are well aware that some investors may feel an urge to lock in gains at the first sign…