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

This multi-factor estimate of stock market risk is based on a regression to median stock market levels.

This multi-factor estimate of stock market risk is based on a regression to median stock market levels.

The eighth consecutive month of gains for the S&P 500 was made possible by some unlikely heroes.

With a late-month surge in Financials and slump in Tech, our Royal Blue Low P/E Tier turned in its best monthly performance of 2017, and beat the High P/E Tier for only the third time this year.

After some turbulence early this year, our Ratio of Ratios seems to have found a comfortable spot. This is the third consecutive month with a 4% premium for Small Caps.

Our Up/Down Ratio sports a “two-month” reading of 1.43—the lowest level of 2017. All is not lost—we’ve seen decent aggregate earnings growth in 2017 despite below average Up/Down figures.

This multi-factor estimate of stock market risk is based on a regression to median stock market levels.

The S&P 500, showing little concern for valuations or the political climate, had its best month of performance since February.

Growth stocks more than made up ground lost to Value in September. Dividing stocks by market cap, Growth segments are leading Value by spreads of 10-15% YTD.

This is the first time this year we’ve spent two consecutive months above the long-term median Small Cap premium of 3%.

The Up/Down Ratio sports a lofty reading of 2.08—the best “one-month” measurement since January of 2015. We’ve seen this movie before—strong initial readings have fallen apart in each of the last four quarters.

Thumbing its nose at the laws of thermodynamics, the S&P 500 notched its eighth consecutive quarterly gain. Over these two years, the index is up 37%.

Outperformance in Financial and Energy stocks helped Value find its legs in September. For Q3, however, Growth still beat Value in all three segments.

On the back of robust Small Cap performance, our Ratio of Ratios spiked through both the Small Cap discount zone and the long-term median premium.

The Up/Down Ratio sports a final reading of 1.44. The soft earnings comparison window, running from Q1 2015 to Q2 2016, is no more.

This multi-factor estimate of stock market risk is based on a regression to median stock market levels. The valuation comparisons in the detailed tables consider all inflation periods since 1957.

This multi-factor estimate of stock market risk is based on a regression to median stock market levels.

Like a hard-partying college student with a term paper due, the S&P 500 crammed in five positive sessions to end August—just enough to extend its monthly win streak to five. Weakness in the Equal Weighted Average, and awful performance in the lower quintiles, took all the shine off this victory.

Growth stocks outperformed for the seventh time out of the eight months of 2017. Small Cap Value, the biggest winner of 2016, has fallen back into negative territory YTD.

Small Caps are now selling at a 1% valuation discount to Large Caps. Underperformance from Small Caps have kept their valuations in check.