Q: Today you answered “probably not” to my question about whether ETFs that track the S&P 500 are more risky than mid-cap ETFs which are trading at their historical values. However, your reasoning — that the S&P 500’s valuation is not excessively high given expected earnings growth and potential lower interest rates, and that investors tend to favour large-cap stocks over mid-caps in uncertain markets — seems to suggest the opposite conclusion.
Could you clarify whether you meant “probably yes” instead?
Could you also indicate if your answer differs if one's time frame is 10 years+?
Could you clarify whether you meant “probably yes” instead?
Could you also indicate if your answer differs if one's time frame is 10 years+?
5i Research Answer:
If the question is "is the S&P" riskier than mid caps we would still say 'probably not'. Put another way, in current conditions ans outlook we would expect large caps to continue to outperform in the short to medium term regardless of any valuations differentials.