Cornerstone Investment Partners

Small business optimism has recovered to levels not seen in the last two years. That confidence suggests less concern over a near-term recession at the grassroots level and may drive continued stability in underlying economic factors.

Please find below our quarterly assessment of the impact on bank equity levels from marking-to-market securities held on their balance sheets. We are likely to start a Federal Reserve rate cutting cycle. In the absence of rising credit spreads, the valuations of these securities may start to improve. Cornerstone adjusts the valuations of banks we review for both the impact of these securities and excess credit-related exposure, and wrote a thought paper on the topic last year when concerns spiked, which can be found here (https://lnkd.in/gqcnVfnu).

Cornerstone uses our proprietary #FairValueModel to assess #valuation opportunities for companies across the market. Weekly, we compare values to the current prices of #stocks. We’re now publishing results for followers, and our #investment team is available for deeper insights.

The US continues to stand out versus peers, as sales and EPS growth levels remain stronger than other developed markets. 

Encouragingly, outside of a few companies experiencing idiosyncratic (often structural) pressure, publicly disclosed job cuts appear to have taken a back seat recently, suggesting corporate confidence.

One theme of the past year has been the divergence in outcomes and economic sentiment for those with different incomes. Even with rising wages on the whole, lower-income families have felt the impact of inflation more significantly, and it has been shown in consumer behavior and spending patterns. While this trend continues, this likely will impact companies with greater or lesser exposure to these population groups and remain a politically charged issue.

Welcome to Cornerstone, Zahraa Mohsen! Zahraa is a recent graduate from The University of Georgia, and she will be working closely with our operations team.

Cornerstone uses our proprietary #FairValueModel to assess #valuation opportunities for companies across the market. Weekly, we compare values to the current prices of #stocks. We’re now publishing results for followers, and our #investment team is available for deeper insights.

The #volatility of the last few weeks is a reminder that #drawdowns are common even during broadly strong #markets, and don’t always portend sustained weakness. As shown by the below chart, 5% pull-backs occur on average 3 times a year, 10% pull-backs once a year, and even 15% pull-backs every other year. We had a peak-to-trough decline of approximately 8.5% from mid-July through the first week of August. Since then, the S&P 500 has recovered to be all of 2% below its highs. Cornerstone’s #investmentphilosophy is that stock prices are more volatile than the fundamentals that determine value. Did fundamentals really change in those three weeks?

Cornerstone uses our proprietary #FairValueModel to assess #valuation opportunities for companies across the market. Weekly, we compare values to the current prices of #stocks. We’re now publishing results for followers, and our #investment team is available for deeper insights.