S&P Intrinsic Value Update – ValueWalk Premium
Liquidity Factor Investing

S&P Intrinsic Value Update

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Q4 hedge fund letters, conference, scoops etc

Liquidity Factor Investing

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The Dallas Fed inflation measure, 12mo Trimmed Mean PCE, was reported at 1.84%. This is a drop of ~0.2% from recent levels of 2.02% Inflation remains controlled.

S&P Intrinsic Value

The SP500 Value Investor Index(VII) for April is $2357. The SP500 priced at $2825 represents a 19.4% premium. Should inflation continue to ebb from current levels, the VII will justify higher equity prices, i.e. lower inflation makes SP500 EPS more valuable.

S&P Intrinsic Value

The VII has its greatest value in identifying good equity buying levels. Dec 2018’s SP500 decline reduced the premium to 3% and was a good buying opportunity. Past market peaks represented 100%-50% SP500 premium to the VII. While the VII is not used to identify market tops, the SP500 ~20% premium present today is not overly speculative. Before this investment cycle peaks, the expectation is that the SP500 is likely to price more than 50% premium to this index. The VII represents US growth fundamentals since 1939 and sports a 6%+ year over uptrend. Should tariff and home mtg initiatives currently in process prove successful, in 4yrs-5yrs the SP500 has the potential to price in the $4,000-$5,000 range with a 50% premium to the VII. A more speculative market could see higher prices.


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