2019-114 U.S. IPO Pricings-63 Positive Returns.
Follow up to my IPO
comments from last week
the headlines about IPO disappointments, there is a broader takeaway: Investors
have become more discriminating, and that’s good for everyone. “Everything has
changed, and nothing has changed,” says Lise Buyer, founder of Class V Group,
an IPO consulting firm. “Lately, there’s been lots of noise and fireworks, and
hullabaloo about direct listings. But the No. 1 thing is that fundamentals have
not changed. Institutional investors are pretty darned smart when looking at
IPOs, regardless of structure and buzz. Investors will analyze the company, the
prospects for the future, and the price at which they’re being offered the
chance to invest. That has not changed as long as I’ve been in the business.”
S&P 500 sector weightings are important to
monitor. Over the years when weightings have gotten extremely lopsided
for one or two sectors, it hasn’t ended well. Below is a table showing
S&P 500 sector weightings from the mid-1990s through 2016. In the
early 1990s before the Dot Com bubble, the US economy was much more evenly
weighted between manufacturing sectors and service sectors. Sector
weightings were bunched together between 6% and 14% across the board. In
1990, Tech was tied for the smallest sector of the market at 6.3%, while
Industrials was the largest at 14.7%. The spread between the largest and
smallest sectors back then was just over 8 percentage points.
The Dot Com bubble completely blew up the balanced economy, and looking back
you can clearly see how lopsided things had become. Once the Tech bubble
burst, it was the Financial sector that began its charge towards
dominance. The Financial sector’s sole purpose is to service the economy,
so in our view you never want to see the Financial sector make up the largest
portion of the economy. That was the case from 2002 to 2007, though, and
we all know how that ended.
Unfortunately we’ve begun to see sector weightings get extremely out of
whack once again.
Is the market too complacent about the risk of higher oil
After all, rising prices can limit consumers’ ability to spend
on everything other than gasoline, natural gas, and heating fuel. All those
products become more expensive as oil prices rise. That can be bad for the
Rising oil prices can also increase headline inflation numbers.
And higher inflation makes it harder for the Federal Reserve to cut interest
rates to keep the economy chugging ahead. That also sounds bad.
Still, crude’s impact on the economy is far less than it used to
Why Oil Prices Don’t Matter for Stocks Anymore-By Al Root