If Greenspan is aiming his interest rate guns specifically at the stock market, I would be concerned that what he's seeing is potentially misrepresentative of the market in general. The cap-weighted indexes like the S&P 500 or the Nasdaq, for example, are top-heavy.
Some older data from 11/17/99 indicate that the top 15 market cap companies of the Nasdaq made up 44% of the total market cap for the index. The other 4,231 companies made up the other 55.9%
As for the S&P 500, the top 100 companies made up 71% of the index's market cap, while the other 400 issues covered the other 29%. And did you know too that the top 10 contributors to the S&P 500 gains last calendar year accounted for 58.7% of the index's gains? The other 490 stocks made up for the rest, or 41.3% of the rest of the gains.
Now, with the Value Line universe having a MEDIAN P/E multiple of around 13.5, one could easily argue that hidden behind the ultra-cap powerhouses lies a number of decently valued companies. In fact, these other companies far outnumber the issues that have been the major contributors to the indexes.
With the claim that Greenspan is overly concerned with the market, whether you believe he has aimed the interest rate barrel directly at it or not, if it happened to be true, then it would suggest that a disproportionate number of companies would be feeling the interest rate pain just because of a 'small' crowd that seems to be breaking all the rules.
RT |
