Forbes recently published an online article entitled, “The Fed Said The Stock Market Is Running On Fumes, A Brief Look At Fed Market Calls.” Author Adam Sarhan called out two conflicting opinions from experts on the U.S. stock market—Federal Reserve Bank of San Francisco President John Williams said it was running on “fumes” while Chair of the U.S. Federal Reserve System Janet Yellen said asset prices are “rich”—and asked a compelling question: “Should investors be worried?”
To get some insight into his query, Sarhan reached out to a handful of investment professionals for their opinions on the matter and featured them in the article. Included in that group was Goodwood Capital Management’s founder and long short equity veteran, Ryan Thibodeaux.
“We would generally agree with Williams’ statement, mostly due to the fact that stock markets are market cap weighted. There are many dislocations in equity markets today, but these are more similar to the 1999-2000 era versus the 2007-2008 peak.
For example, large cap growth stocks have outperformed small cap value by the most since 1999/2000. The 5 largest market cap stocks today now exceed the aggregate market cap of the entire Russell 2000 index. Across all sectors, large caps have outperformed small cap peers by a wide margin over the last several years. Similarly, quality and defensive factors have also vastly outperformed. These groups of stocks are certainly priced to perfection.
Looking ahead, we think that long/short equity strategies may outperform on both a relative and absolute basis, especially those with an emphasis on shorting the most overvalued stocks/sectors.”
If you’d like to learn more about Goodwood’s strategy and gain more insight into how we’re viewing current market conditions, read our free quarterly commentary.
ABOUT THE AUTHOR
Josh Pesses is a Portfolio Manager at Goodwood Capital Management.
Josh joined Goodwood in January, 2013 as a Portfolio Manager. Prior to joining Goodwood, Josh was a Partner and Senior Equity Research Analyst with Maple Leaf Partners, LP from 2007 to 2012. Maple Leaf Partners is a long short equity hedge fund started in New York by Dane Andreeff in 1996. In 2003, Julian Robertson’s Tiger Management seeded Maple Leaf and it became what is commonly referred to as a “Tiger Seed.” The firm eventually grew to over $2 billion in assets under management.
To read Josh Pesses full bio or other Goodwood team members, click here.