Articles by Phil Segner, CFA Co-Portfolio Manager & Sr. Analyst

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With structural economic and market changes, and influences of ever-evolving tech advances, years ago we introduced our “New-Era” median valuation metrics (1995-present). For the last decade, we’ve drifted further away from those “New-Era” benchmarks, which compelled us to take a look at today’s stock valuations compared to “New-New” Era median levels based on data from 2018-forward.

Advances in the S&P 500’s underlying fundamentals marginally outpaced the improvement in price. Our “New-Era” downside-to-median estimate narrowed from -32% to -30%, while the 1957 to date figure was unchanged month-over-month.

After the first month of Q4 reporting, S&P 500 estimated bottom-up operating EPS are now 4.5% higher than at the end of December. This bounce follows the initial script of the previous two quarters, which saw projections jump 2% July and 5% in October. Final figures for both Q2 and Q3 continued to climb as reporting progressed, so we’d presume Q4 to follow suit, increasing somewhat more before earnings season is finished. Also, Q4 has now finally shot above its pre-“Liberation Day” estimate set back in March.

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Read this week's MTI

Read the latest MTI update

Read this week's Major Trend. 

When we first published this work in 2011, the Bridesmaid’s alpha, both for asset classes and sectors, looked almost too good to be true. Since then, the performance edge for each has narrowed significantly—it’s still meaningful, but no longer magical.

Any hint of an Equal Weighted S&P 500 resurgence ignites a spark of optimism in active managers’ hearts. An EW run similar to the Tech Bubble aftermath doesn’t seem too farfetched. The downside? A bear market would probably be involved.

No, Virginia, there wasn’t a 2025 Santa Claus rally. It came down to the final few ticks, but the last five trading days of 2025 plus the first two trading days of the new year go in the books as a lump of coal.

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After narrowly averting a bear market in April, the S&P 500 rocketed 39% to end the year with an +18% total return. At present, our data shows the potential downside to revert to median levels is a loss of 44%.

Historically, the momentum plays of our Dreams and Nightmares have worked both ways, and 2025 was a “confirmation” year for this study. The best performing groups from 2024 beat the S&P 500 in 2025, and the worst performers of 2024 trailed both the Dreams and the S&P 500 in 2025.

After barely dodging a bear market decline in April, the S&P 500 proceeded to surge 39% through year end. The Mag Seven stocks followed the same pattern in exaggerated form. All seven names ended 2025 in positive territory, but contributed much less to overall performance than the previous two years. Still, their effect over the past three years is overwhelming: S&P Top Ten Index +188% vs. the Equal Weighted S&P 500 +43%.

Royal Blue Value surged 10% and 8% in the last two quarters of 2025, nearly doubling the annual return of RB Growth (+16%).

Our Ratio of Ratios continued its never-ending sideways trek in 2025, ending the year right at its four-year moving average. We enter 2026 with this vignette advising that Small Caps can be purchased at a steep discount to Large Caps (just like the last six years).

The final Up/Down ratio for Q3 is 1.61—the highest “three-month” figure since Q2-21, and the second consecutive above-average reading. Our survey of around 5,000 firms continues to point to an EPS growth story that has extended to the most firms since the economic bounce following the pandemic.

Read this week's Major Trend.

Read this week's Major Trend.