Thursday, April 24, 2008

BCA: Underweight Small Cap Equities


The Bank Credit Analyst today:
The surge in the U.S. dollar cost of oil is draining consumer spending power, adding to an already challenging backdrop as a consequence of job insecurity and the negative wealth effect from housing. Small cap relative valuations are tightly linked with consumption growth, and a further spending slump should ensure that still elevated P/E multiples continue to compress. Stay bearish on small cap relative performance.

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