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Borsgade
In First Eagle’s “Summer Time Observations,” Matthew McLennan and his colleagues give their assessment of the current market. Here they zoom in on small cap investment and investment in ‘credit’ – i.e. different types of bonds. Both places where they see opportunities.
[…] the Russell 2000 trades at a discount of about 30% to its long-term average priceto-earnings (P/E) ratio while the S&P 500 is again trading at a premium. The last time the Russell 2000 traded as cheaply was during the global financial crisis—and it delivered annual average returns of 30% for the three years that followed that bottom. While there’s obviously no guarantee this will happen again, it’s a nice precedent to be aware of.”
In relation to investing in bonds, Jon Dorfman writes:
Since the financial crisis, credit as an asset class has been pretty dull to anyone but natural credit investors. We appear to be at an inflection point, however, as credit markets seem to be consistently offering investors equity-like returns—something we haven’t seen for decades. The Fed’s hiking cycle has spawned seismic shifts in the credit market, and absolute yield relative to risk appears to be more attractive than it has been since the early 2000 […]
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