For those who’d like to have a factual discussion about what’s “cheap” vs. “expensive”, on slide 39 of our current Q3 Macro Themes deck we have today’s Chart of The Day, which shows quite clearly that Tech is nowhere near as expensive as it can be.
Since Einstein taught the Modern Macro Free Folk that everything is relative, here’s where some NTM (next twelve months) P/E Multiples are relative to themselves, looking back 30 years:
- Tech stocks are in the 62% percentile
- Consumer Staples are in the 97% percentile
- Energy stocks are in the 93% percentile
Put another way, if you’re really a valuation expert who uses history as his/her guide and has the discipline to not over-pay for equity exposures, two of your US Equity Sector underweights in 2017 should have been what have become 2 of the worst performing sectors: Energy stocks (XLE) are down -16.4% YTD and Consumer Staples (XLP) are only up +5.8% YTD.