capital markets: observations and insights€¦ · source: factset and goldman sachs. bull markets...
Post on 13-Aug-2020
0 Views
Preview:
TRANSCRIPT
Capital Markets: Observations and Insights This Is Not Exuberance Summer 2017
0
Neuman’s Notables
Page 1
The voyage of a bull market begins in despair, sails forward in anxiety, catches
the winds of enthusiasm, and finally hits the rocks of exuberance.
It is often said that markets do not die of old age. Then what does kill them? Excess. Too much
exuberance breeds too much spending and too much debt. Inflation picks up, interest rates must be
raised, and the party ultimately ends as the economy goes back to living within its means.
In the pages that follow, we show data that demonstrates the economy is not operating above its
potential or beyond its means. It therefore is not generating too much inflation and monetary policy
need not be onerous. In our view, equity valuations, while higher than historical averages, do not
preclude reasonable annual returns over the next decade that will likely handily beat fixed income.
From our perch, the economy can continue to sail onward and avoid the rocks of exuberance.
Sincerely,
Brad Neuman, CFA Senior Vice President
Client Investment Strategist
Key Observations
Page 2
Table of Contents
Neuman’s Notables
Performance
Fundamentals
Valuation
Pages 3-7
Pages 8-14
Pages 15-23
Pages 24-29
• Fundamentals have driven performance in 2017, after disconnecting from stock prices
last year
• There is a resurgence in earnings growth after a couple of years of weakness
• Leading indicators suggest that economic growth and corporate profits will continue
to expand
• Powerful long-term forces are driving divergence between Growth and Value
performance
Page 3
Source: FactSet as of June 2017.
-7%
-6%
-5%
-4%
-3%
-2%
-1%
0%
1%
2%
3%
19
85
19
88
19
91
19
94
19
97
20
00
20
03
20
06
20
09
20
12
20
15
GD
P / P
ote
ntia
l G
DP
-1
Recession U.S. Output Gap
• Over the past 30 years, the U.S. economy has entered a recession only after several
quarters following the output gap turning positive
• Currently, however, the U.S. output gap is modestly negative, indicating that the
economy is operating below its potential and still has room to expand
U.S. GDP is
running
below
potential
Mind the Output Gap!
Notables
Page 4
Source: FactSet as of June 2017. Inflation represented by PCE Price Index ex-food and energy (year over year).
-2
0
2
4
6
8
10
12
14
16
18
20
19
66
19
69
19
72
19
75
19
78
19
81
19
84
19
87
19
90
19
93
19
96
19
99
20
02
20
05
20
08
20
11
20
14
20
17
Recession Fed Funds Effective Rate Inflation
• Every major recession in the past 75 years has been preceded by substantial Fed
Funds rate tightening or inflation acceleration, or both
• On average, the U.S. has not entered a recession until about three years after material
Fed tightening, which we believe is beginning this year
Today,
short-term
interest
rates and
inflation are
both less
than 2%
Leading Cycle Indicators Are Not Flashing Red
Notables
0
2
4
6
8
10
12
14
1932 1943 1954 1965 1976 1987 1998 2009 2020
Dura
tion o
f B
ull
Mark
et (Y
ears
)
Year that Bull Market Ended
1950-1980
Average: 4.3 Years
1930-1950
Average: 1.7 Years
Waiting on the Sidelines Can Be Costly
Source: FactSet and Goldman Sachs. Bull markets over 6-months in duration since 1930.
• Bull markets have been getting longer over time
• The current bull market is four years younger than the 1990s bull market
‒ Those last four years produced >150% total return; even through the trough of the
following correction, equities generated a high-single digit annual return
Page 5
Notables
Current Bull
Market (ongoing)
1980-2010
Average: 7.2 Years
2010-Current
Average: ?? Years
74%
32% 30%
44% 39%
65%
93%
45% 42% 36%
43%
23%
Aug-5
6
De
c-6
1
Feb
-66
No
v-6
8
Jan-7
3
No
v-8
0
Aug-8
7
Jul-9
0
Ma
r-0
0
Oct-
07
Me
dia
n
Cu
rren
t
Missing: Exuberance that Typically Accompanies End of Bull Run
Source: BofA ML U.S. Equity & Quant Strategy and FactSet. Data through 6/30/17.
• Over the past 60 years, equity markets typically have had very large increases preceding
their peaks
• The current cycle has not displayed the same kind of very strong gains in the past couple
of years that marked the end of prior bull markets
Page 6
Notables
Typical exuberance
of a market peak is
not currently
present
2-Yr Returns Preceding S&P 500 Peaks
-5%
0%
5%
10%
15%
20%
5 10 15 20 25
Source: FactSet. Monthly data from January 1986 through June 2017
• There is a strong relationship between starting valuation and ensuing 10-year returns for
both stocks and bonds
• Current valuations suggest equities should materially outperform bonds over the coming
decade (mid-single digit vs. low-single digit annualized returns)
Page 7
S&P 500 P/E vs.
10-Year Returns
S&P 500 Price/Earnings
S&
P 5
00 1
0-Y
ear
An
nu
alized
Retu
rn
R² = 0.86
= month
0%
2%
4%
6%
8%
10%
12%
4% 5% 6% 7% 8% 9% 10% 11% 12%
BAA Bond Yield vs.
U.S. Aggregate Bond Returns
R² = 0.93
Barc
lays U
.S. A
gg
reg
ate
Bo
nd
In
dex
An
nu
alized
Retu
rn
Moody’s BAA Corporate Bond Yield
Notables
The Single Greatest Predictor of Future Stock Market Returns
= current
-10
-5
0
5
10
He
alth C
are
Industr
ials
Fin
ancia
ls
Techn
olo
gy
Ma
teri
als
Re
al E
sta
te
Co
nsum
er
Dis
cre
tio
nary
Utilit
ies
Co
nsum
er
Sta
ple
s
Energ
y
Tele
com
U.S. World
Growth Sectors Are Leading YTD
Performance
Page 8
Source: FactSet as of 6/30/17. U.S. represented by S&P 500 and World is represented by MSCI All Country World Index.
-15
-10
-5
0
5
10
15
20
25
Techn
olo
gy
He
alth C
are
Co
nsum
er
Dis
cre
tio
nary
Industr
ials
Ma
teri
als
Utilit
ies
Co
nsum
er
Sta
ple
s
Fin
ancia
ls
Re
al E
sta
te
Tele
com
Energ
y
U.S. World
• As investors refocused on growth and current fundamentals, growth sectors such as
Technology, Health Care, and Consumer Discretionary outperformed year-to-date
2017 YTD
Returns (%)
2Q17
Returns (%)
Growth Sectors
Page 9
Scale and Growth Rewarded
Performance
• Characteristics of large secular growth stocks have done best this year, while last
year’s leader, dividend yield, has underperformed recently
0.8 0.8
0.1
-0.2
-0.7 -0.8
-1.4 -1.5 -1.7
-2.6 -2.9
Ma
rke
t C
ap
EP
S G
row
th
Earn
ings / P
rice
Earn
ings V
aria
bili
ty
De
bt /
Equ
ity
Re
lative S
treng
th
Tra
din
g A
ctivity
Div
ide
nd Y
ield
Re
ve
nue
/ P
rice
Book / P
rice
Price V
ola
tilit
y
2017 YTD
Excess Return (%)
1.0 0.8
0.0
0.0 -0.3 -0.4 -0.4
-0.8 -0.9 -0.9
-2.6
Re
lative S
treng
th
EP
S G
row
th
Earn
ings / P
rice
Ma
rke
t C
ap
De
bt /
Equ
ity
Re
ve
nue
/ P
rice
Earn
ings V
aria
bili
ty
Book / P
rice
Div
ide
nd Y
ield
Tra
din
g A
ctivity
Price V
ola
tilit
y
2Q17
Excess Return (%)
Source: FactSet as of 06/30/17 using Northfield defined quantitative factors for the Northfield broad U.S. market database.
Price and Fundamentals Converge
Source: FactSet. S&P 500 Growth and Value Indices used to represent Growth and Value stocks. Fundamentals are LTM EPS.
Page 10
• Last year, stock prices and fundamentals diverged as investors positioned for perceived
changes following the U.S. presidential election
• This year, as expectations for policy changes have waned, fundamentals have taken
center stage again, which has been reflected in stock prices
Performance
90
95
100
105
110
Jun-1
6
Jul-1
6
Aug-1
6
Sep-1
6
Oct-
16
No
v-1
6
De
c-1
6
Jan-1
7
Feb
-17
Ma
r-1
7
Apr-
17
Ma
y-1
7
Jun-1
7
Disconnect
Stock Prices
Convergence
Fundamentals
Growth Relative to Value
0
20
40
60
80
100
-15
-10
-5
0
5
10
15
20
Techn
olo
gy
He
alth C
are
Co
nsum
er
Dis
c
Industr
ials
S&
P 5
00
Ma
teri
als
Utilit
ies
Co
nsum
er
Sta
ple
s
Fin
ancia
ls
Re
al E
sta
te
Tele
com
Energ
y
Earnings Drove Sector Performance YTD
Performance
Page 11
Source: FactSet as of 6/30/2017. Companies beating estimates based on average of Q416 and 1Q17 earnings seasons which were reported in 1H17.
S&
P 5
00 S
ecto
r
Retu
rns Y
TD
(%
) %
Co
mp
an
ies
Beatin
g E
stim
ate
s
• In contrast to much of last year, sectors with the strongest earnings performance YTD had
the best stock performance, such as Technology and Health Care
Leading Price & EPS Performance
The Earnings Growth Resurgence Is Boosting Performance
Performance
Page 12
Source: FactSet as of 6/30/17. Based on consensus estimates of next 12-month EPS. Actual earnings per share might be materially different than shown. MSCI ACWI ex-US
performance based on local currency.
Total Return = Dividend Yield + EPS Growth +/- P/E Change
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
35%
Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 Jun-17
Dividend EPS Growth P/E Change
12-
Month
Total
Return:
31% 5% 21% 25% 7% 4% 18%
12-
Month
Total
Return:
15% -8% 19% 18% 10% -9% 22%
S&P 500 MSCI All Country World Index ex-USA
-20%
-10%
0%
10%
20%
30%
40%
Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 Jun-17
Dividend EPS Growth P/E Change
EPS
Growth
Reversal
EPS
Growth
Reversal
Has Active Relative Performance Troughed?
Page 13
Performance
Source: Nomura/Instinet, Joseph Mezrich and FactSet through 06/30/17. Fund performance is trailing 5-year data and Small Cap Outperformance is Ibbotson US Small Stock Premium
5-year rolling return.
• While there are secular pressures affecting active management, cyclical factors tend
to be much more powerful in the short- and medium-term
• We believe the trough in cyclical active performance may be behind us as small caps,
the largest of several factors that drive active relative performance, are likely to perform
better in the future (see pg. 20)
-20%
-10%
0%
10%
20%
30%
40%
0%
20%
40%
60%
80%
100%
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
Sm
all C
ap
Re
lativ
e
Ou
tpe
rform
an
ce
% o
f F
un
d A
sse
ts
Ou
tpe
rfo
rmin
g
Active Relative Performance Is Cyclical
Source: FactSet. Data through 06/30/17.
Style Divergence
• Growth has had persistent, strong outperformance over the past decade due to:
‒ Deleveraging / slower growth environment
‒ Changing returns on capital
‒ Speed of innovation
Page 14
Performance
Growth has
outperformed
Value by 45% over
the past decade
40
60
80
100
120
140
160
180
200
220
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Total Return
Russell 3000 Growth
Russell 3000 Value
40%
50%
60%
70%
80%
90%
100%
110%
0.9
1.4
1.9
2.4
2.9
3.4
19
75
19
77
19
79
19
81
19
83
19
85
19
87
19
89
19
91
19
93
19
95
19
97
19
99
20
01
20
03
20
05
20
07
20
09
20
11
20
13
20
15
20
17
MS
CI W
orl
d V
alu
e /
Gro
wth
Source: FactSet as of June, 2017.
Style Divergence - Deleveraging
• After the Global Financial Crisis, the U.S. consumer sector, the most powerful driver of
global economic activity, decreased its debt, or leverage, ratios
• This deleveraging process has caused slower growth and lower interest rates; both of
which have driven growth stock outperformance relative to value stocks
Page 15
Fundamentals
Lower leverage has
coincided with Value
underperforming Growth
U.S
. Ho
useh
old
Deb
t to G
DP
Style Divergence - Changing Returns on Capital
Page 16
Fundamentals
40
50
60
70
80
90
100
110
2007 2009 2011 2013 2015 2017
To
tal R
etu
rn I
nd
ex
Source: FactSet as of 6/30/17. Price-to-earnings and price-to-book returns are based on the E/P and B/P Northfield factors for the Northfield broad U.S. market database.
• The culprit for value investors has been very weak performance in buying low P/B stocks,
while P/E strategies have fared much better
• Book value may no longer be as relevant given changing business models, e.g., R&D is
not capitalized in book value
• The overall level and dispersion of margins and returns are increasing so reversion to the
mean (low P/B strategy) may not work as well
P/B, not P/E, has driven
Value underperformance
P/E
P/B
Russell 1000 Value /
Growth
Style Divergence - Speed of Innovation
Fundamentals
Page 17
Source: Asymco.
• Innovations are penetrating U.S. markets at an even faster pace
‒ “Growth” stocks should benefit from innovation while “value” stocks that appear cheap
may simply be victims of change
0
40
80
120
160
200
Ne
wsp
ape
r -
170
4
Sto
ve -
1750
Ho
sp
ita
ls -
177
6
Second
. S
ch
. -
181
0
Ste
am
ship
- 1
810
Ra
ilro
ad -
1830
Tele
ph
one
- 1
880
Ro
ads -
18
80
Ele
ctr
ic p
ow
er
- 1
882
Ra
dio
- 1
89
7
Wash. M
ach. -
1904
Air T
ravel -
191
4
Dis
hw
ashe
r -
1924
Air C
on. -
19
33
TV
- 1
93
6
Ca
ble
TV
- 1
950
Cre
dit C
ard
- 1
950
VC
R -
19
65
Mic
row
ave -
1967
AT
M -
19
69
PC
- 1
974
Inte
rnet
- 198
9
Sm
art
phon
e -
19
96
MP
3 P
layer
- 199
8
Socia
l M
edia
- 2
004
The faster speed of
innovation may be
exacerbating the disparity
between growth and value
fundamentals
Years from Market Entry to 50% Penetration in the U.S.
$50
$70
$90
$110
$130
$150
80
90
100
110
120
130
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
S&
P 5
00 E
PS
Lead
ing
Eco
no
mic
In
dex
18
Month
Lead
Source: FactSet, Conference Board as of June 2017. Based on NTM EPS estimates.
Leading Indicators Suggest Earnings Will Continue to Rise
• The Conference Board Leading Economic Index (LEI) typically leads earnings by 6-18
months and usually peaks one to two years prior to a recession
• Given that the LEI is increasing solidly year-over-year and hit a record high in 2Q17, we
believe the economy and earnings have room to run
Page 18
Fundamentals
Leading Economic
Index indicates further
EPS growth
Economic Outlook
• Strong business and consumer confidence
• Solid U.S. consumer balance sheet
• Rising real U.S. disposable income
• Potential fiscal stimulus
• Tightening monetary policy
• Rising U.S. labor costs
• China debt levels
• Political risk
Tailwinds
Headwinds
Page 19
Fundamentals
80
90
100
110
120
130
140
150
160
170
180
20
13
20
14
20
15
20
16
20
17
20
18
Earnings Per Share
R2000 R1000
Smaller Capitalization Stocks Poised to Outperform
Fundamentals
Page 20
Source: FactSet as of June 2017. EPS for 2017-2018 are consensus estimates and actual earnings per share might be materially different than shown.
• Smaller capitalization tailwinds
‒ Stronger fundamentals: Estimated EPS growth for 2017/18 approximately double that of large cap
‒ More levered to fiscal stimulus: Small caps are more U.S.-oriented and have higher
operating leverage
‒ Rising interest rates: Small caps have historically outperformed large caps in rising rate
environments and vice versa in falling rate environments
‒ Attractive valuation: Small cap sales multiple discount implies opportunity
-40%
-35%
-30%
-25%
-20%
-15%
-10%
-5%
0%
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
Enterprise Value / Sales R2000 / R1000
Historically Large
Discount
Small
Caps
Growing
Faster
Innovative Companies Grow Earnings and Stock Prices Faster
Source: FactSet. Most/least innovative based on R&D % of sales. Est EPS growth Apr 2007- Apr 2017 measured after classification of S&P 1500 companies into innovation quintiles in
Dec. 06. Most/least innovative stock performance based on S&P 1500 quintiles one month returns for same time period. *Baruch Lev and Suresh Radhakrishnan, “The Stock Market Valuation of R&D Leaders.”
• Innovation propels economic growth over time
• Studies have shown, and our research demonstrates, that the most innovative companies
grow their sales and stock prices faster*
Page 21
Fundamentals
10%
5%
Most Innovative Least Innovative
Est. E
PS
Gro
wth
2007
-2017
EPS Growth…
-
100
200
300
400
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
…Stock Prices
Innovation Drives:
and
Least Innovative
Most Innovative
The Growth Advantage
Source: FactSet as of June 2017. Growth represents consensus long-term analyst estimates, and actual future EPS growth rates might be materially different than the forecasts shown.
• Three variables drive P/E multiples: growth, returns, and risk
• As compared to the Russell 1000 Value, the Russell 1000 Growth has higher expected
EPS growth, higher returns on equity, and lower risk in the form of better balance sheets
Page 22
Fundamentals
Stronger Growth
14.4%
9.3%
Long-Term EPS Growth
R1000G R1000V
Higher Returns
24.8%
10.1%
Return on Equity
R1000G R1000V
Lower Risk
1.2x
2.2x
Net Debt / EBITDA
R1000G R1000V
The Great Rotation—Economic Policy
Source: IMF, Evercore ISI, FactSet, and Alger estimates. Note: central banks include Federal Reserve, Bank of Japan, and European Central Bank.
• Central bank asset expansion, or quantitative easing (QE), is slowing globally
• Fiscal policy is exiting the era of austerity that began after the Global Financial Crisis and
in some countries is actually turning stimulative
• This implies bond yields will move higher as QE buying of bonds gives way to fiscal
stimulus and issuance of bonds
Page 23
Fundamentals
Monetary policy
gives way to
fiscal policy
-25
-20
-15
-10
-5
0
5
10
15
0%
5%
10%
15%
20%
25%
30%
20
11
20
12
20
13
20
14
20
15
20
16
20
17E
20
18E
Ce
ntr
al B
an
k A
sse
ts Y
oY
Ch
an
ge N
um
ber o
f Co
un
tries L
oo
se
nin
g
Les
s T
igh
ten
ing
Fis
ca
l Po
licy
Fiscal
Monetary
The Great Rotation—Asset Allocation
Valuation
Page 24
Source: FactSet, Federal Reserve, and S&P, as of 06/30/17.
• Moving from monetary stimulus and quantitative easing to fiscal stimulus and increased
deficits should drive a Great Rotation from bonds to stocks
• The magnitude of the rotation will be fueled by the valuation disparity between equities
and bonds, which are expensive by comparison
‒ The earnings yield for equities is more than 300 bps greater than 10-year Treasury
notes vs. a 60 bps median over the past half century
0
2
4
6
8
10
12
14
16
19
58
19
60
19
62
19
64
19
66
19
68
19
70
19
72
19
74
19
76
19
78
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
20
08
20
10
20
12
20
14
20
16
S&P 500 EPS Yield Treasury Bond Yield
>300 bps
Equity vs. Bond “Yields”
Stocks are attractively
valued relative to bonds
Not All Sectors Are Expensive
Valuation
Page 25
Source: FactSet, based on S&P 500 Index, 6/30/17. Note: energy and telecom are excluded; the former because of an extremely high P/E due to depressed earnings and the latter
owing to a small number of constituents. Real estate is a new sector classification, so for the historical data shown above, an industry group category that has approximately 16 years
of data was utilized.
• Bond-like equities such as Utilities remain expensive due to the search for yield while
some cyclicals have become more expensive recently as well
• Growth sectors are reasonably valued relative to other sectors and compared to history,
particularly given low levels of interest rates
21% 21%
16%
9% 7% 7% 5%
-3% -5%
Utilit
ies
Ma
teri
als
Co
ns. S
taple
s
Industr
ials
Fin
ancia
ls
Re
al E
sta
te
Co
ns. D
iscre
tiona
ry
He
alth C
are
Techn
olo
gy
Reasonably Valued
Growth Sectors
P/E
Rela
tive t
o 2
0-Y
ear
Media
n
Growth Valuations Are Compelling
Valuation
Page 26
Source: FactSet, Bank of America as of 06/30/2017.
• The search for yield, and more recently optimism for economically sensitive Value stocks,
have driven Growth stocks to attractive relative valuations
Russell 1000 Growth vs. Russell 1000 Value
PEG Ratio (P/E Divided by Long-Term Growth Rate)
Russell 1000Value
Russell 1000Growth
1.7x
1.4x
Russell 1000 Growth vs.
Russell 1000 Value P/E
30% premium
is low relative
to history
5
10
15
20
25
- 5 10 15
P/E
10-Year Yield
S&P 500 NTM P/E vs. 10-Yr Treasury Note Yield 1964-2017
= Month
Addressing Interest Rate Risks—It’s Too Soon to Worry
Valuation
Page 27
Source: RBC Capital Markets and FactSet. Data is through June, 2017.
Higher Rates
Rising P/E Higher Rates
Falling P/E
• Potential Risk: higher bond yields lower equity valuations?
• Potential Solution: favor equities over bonds given that increasing interest rates
have supported higher P/E multiples at low absolute levels
-7%
-6%
-5%
-4%
-3%
-2%
-1%
0%
1%
2%
19
96
19
97
19
98
19
99
20
00
20
01
20
03
20
04
20
05
20
06
20
07
20
08
20
10
20
11
20
12
20
13
20
14
20
15
20
17
Average
0%
1%
2%
3%
4%
5%
6%
7%
8%
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
S&P 500 Dividend Yield S&P 500 Buyback Yield
Total Yield
Total Yield Compelling
Valuation
Page 28
Source: FactSet and Alger estimates as of 06/30/17. Corporate Bond Yield is Moody's Baa Corporate Bond Yield.
• Dividends + Share Repurchases =
Total Yield
• Equity Total Yield is attractive relative to
corporate bonds
Share Repo. 2.7%
Total Yield
4.6%
Dividend 1.9%
Wide
Spread
Relative
to
History
S&P 500 Total Yield vs. Corporate Bond Yield
Prospective Returns Appear to Favor Growth
Valuation
Page 29
Source: FactSet as of 6/30/17. Table contains annualized S&P 500 GICS sector data. Figures for the EPS Growth represent consensus long-term analyst estimates, and actual future
EPS Growth rates might be materially different than the forecasts shown. P/E assumes reversion to 20-year historic norm, and actual future P/E change may be materially different than
the forecasts shown.
• Growth sectors have significant return potential relative to value and bond-like sectors
EPS Growth
(3-5 year consensus,
reduced by 20%)
Dividend Yield
(last 12 months)
P/E Change
(reversion to 20-year
median P/E)
Five-Year Return
(hypothetical) + + =
Framework for Estimating S&P 500 Sector Returns
Value or Bond-Like Sectors
Utilities 4% 3% -4% Underperformance?
Materials 8% 2% -4% Underperformance?
Consumer Staples 7% 3% -3% Underperformance?
Growth Sectors
Health Care 8% 2% 1% Outperformance?
Consumer Discretionary 12% 1% -1% Outperformance?
Technology 11% 1% 1% Outperformance?
Disclosure
The views expressed are the views of Fred Alger Management, Inc. as of June 2017. Alger has used sources of information which it believes to be reliable;
however, this publication is not intended to be and does not constitute investment advice. These views are subject to change at any time and they do not
guarantee the future performance of the markets, any security, or any funds managed by Fred Alger Management, Inc. These views should not be
considered a recommendation to purchase or sell securities. Individual securities or industries/sectors mentioned, if any, should be considered in the context
of an overall portfolio and therefore reference to them should not be construed as a recommendation or offer to purchase or sell securities. References to or
implications regarding the performance of an individual security or group of securities are not intended as an indication of the characteristics or performance
of any specific sector, industry, security, group of securities, or a portfolio and are for illustrative purposes only.
Risk Disclosures: Investing in the stock market involves gains and losses and may not be suitable for all investors. Growth stocks tend to be more volatile
than other stocks as the prices of growth stocks tend to be higher in relation to their companies’ earnings and may be more sensitive to market, political and
economic developments.
The S&P 500 Index is an unmanaged index generally representative of the U.S. stock market without regard to company size. The Russell 1000® Growth
Index is an unmanaged index designed to measure the performance of the largest 1000 companies in the Russell 3000 Index with higher price-to-book ratios
and higher forecasted growth values. The Russell 1000 Value Index measures the performance of those Russell 1000 companies with lower price-to-book
ratios and lower forecasted growth values. The Russell 2000 Growth Index is an unmanaged index generally representative of common stocks designed to
track performance of small-capitalization companies with greater than average growth orientation. The Russell 2000 Value Index is an unmanaged index
generally representative of the small-cap value segment of the U.S. equity universe and measures the performance of Russell 2000 companies with lower
price-to-book ratios and lower forecasted growth values. The Russell 3000® Growth Index is an unmanaged index designed to measure the performance of
those Russell 3000® Index companies with higher price-to-book ratios and higher forecasted growth values. The Russell 3000 Value Index is an unmanaged
index generally representative of stocks from the Russell 3000 Index with lower price-to-book ratios and lower expected growth rates. The MSCI ACWI Index
(gross) is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed and emerging
markets. The MSCI ACWI consists of 45 country indices comprising 24 developed and 21 emerging market country indices. The indices presented are
provided for illustrative purposes, reflect the reinvestment of dividends and do not assess fees and expenses that would have the effect of reducing returns.
Investors cannot invest directly in any index. The index performance does not represent the returns of any portfolio advised by Fred Alger Management, Inc.
and actual client results might differ materially than the indices shown. Note that past performance is no guarantee of future results. Comparison to a
different index might have materially different results than those shown.
Frank Russell Company (“Russell”) is the source and owner of the trademarks, service marks and copyrights related to the Russell Indexes. Russell® is a
trademark of Frank Russell Company. Neither Russell nor its licensors accept any liability for any errors or omissions in the Russell Indexes and / or Russell
ratings or underlying data and no party may rely on any Russell Indexes and / or Russell ratings and / or underlying data contained in this communication.
No further distribution of Russell Data is permitted without Russell’s express written consent. Russell does not promote, sponsor or endorse the content of
this communication.
ALCAPPRESSPR-0617 Fred Alger Management, Inc. • 360 Park Avenue South, New York, NY 10010 • 800.992.3863 • www.alger.com
Page 30
top related