Semiconductor valuations soar amid growth hype
What the chart shows
This table displays MSCI World valuations across industries, measured by key financial metrics: trailing price-to-earnings (P/E) ratio, 12-month forward P/E ratio, price-to-book (P/B) ratio and dividend yield. Each metric is colour-coded according to 15-year Z-scores, ranging from blue (indicating lower valuations) to red (indicating higher valuations.) Industries are ranked by their average Z-scores, providing a comparative view of relative over- and undervaluation.
This metric provides a normalized view of valuations relative to historical benchmarks, helping investors and analysts identify areas of potential overexuberance or overlooked opportunities.
Behind the data
As of November the semiconductor industry stands out as the most overvalued sector, driven by high trailing P/E and P/B ratios – both exceeding two standard deviations above the historical average. This overvaluation may reflect heightened investor expectations, fueled by strong demand from high-growth areas such as artificial intelligence and electric vehicles.
Conversely, industries such as food products, beverages, personal care and automobile components appear undervalued, potentially due to their perception as mature, lower-growth sectors.
US-European stock divergence driven by tech
What the chart shows
This chart compares the performance of the S&P 500 and STOXX 50 indices, along with the relative performance of S&P 500 Information Technology to STOXX Technology, before and after the Global Financial Crisis (GFC). The indices are rebased to the end of 1989 for pre-GFC comparisons and the end of June 2009 for post-GFC comparisons. The purpose of the chart is to highlight the divergence in equity performance between the US and Europe, particularly in the technology sector – underscoring the pivotal role of technological innovation in driving equity markets.
Behind the data
Before the GFC, US and European stock markets experienced broadly similar growth trajectories. However, post-GFC, US equities, particularly in the tech sector, outpaced European ones. Key factors include:
- The US has consistently led tech innovation, evidenced by its higher rates of patent grants and the dominance of major US tech companies globally.
- The US recovery after the GFC was supported by sizeable fiscal and monetary policies, whereas Europe faced prolonged challenges stemming from the European sovereign debt crisis.
- The S&P 500 has a higher weighting of technology stocks, which have been major growth drivers since the GFC. Meanwhile, although the STOXX 50 has a notable tech weight, it is more focused on traditional sectors like consumer, industrial, and finance. Additionally, European tech stocks have underperformed compared to the US due to differences in innovation and market dynamics.
While the US maintains its lead, Europe has taken a more regulated approach, emphasizing consumer protection, transparency and sustainable innovation. This environment may help Europe close the gap with US tech over time, balancing growth with accountability.
How the S&P 500 has grown across generations
What the chart shows
This chart visualizes the cumulative performance of the S&P 500 segmented by population generations, measuring returns up to the point when the average member of each generation reaches 20 years old. Cumulative annual growth rates (CAGR) are calculated using the midpoint of generational birth ranges, as defined by the Pew Research Center. For instance, Generation Y (Millennials) includes individuals born between 1981 and 1996, with a midpoint of 1989. Each generation is represented by a distinct colour; the shaded areas beneath emphasize generational differences in market returns. This chart serves to highlight long-term market trends and generational economic contexts, offering insight into how cumulative market growth reflects broader economic expansion over time.
Behind the data
In 2024, the average member of Generation Z (Zoomers) reached 20 years old, by which time the S&P 500 had delivered a cumulative return of 430% for investments made at the time of their birth. This growth mirrors levels seen during the dot-com bubble and just before the GFC - periods that defined the childhood and teenage years of Millennials. This chart underscores a striking pattern: with each new generation, the US stock market has reached higher cumulative levels, reflecting robust long-term economic growth and market expansion. However, these high-growth periods also coincide with subsequent economic corrections, reminding us of the cyclical nature of markets and the importance of understanding historical contexts in evaluating generational investment performance.
Tesla leads Magnificent 7 valuation gaps amid speculation on Trump impact
What the chart shows
This table leverages Quant Insight's Macro Factor Models to evaluate the stock prices of the “Magnificent 7” against various macroeconomic indicators. By comparing actual stock prices to model-derived fair values, it identifies which stocks are currently undervalued or overvalued.
Key metrics include:
- Actual price: The current market price in USD.
- Model value: The price derived from Quant Insight’s macro models in USD.
- Percentage gap (5-day MA): The difference between the actual and model price as a percentage, smoothed over a 5-day moving average.
- Fair valuation gap (Standard deviation): A measure of how far the stock's price deviates from its model value, in standard deviation units.
- Model confidence (R-squared): The strength of the model’s predictive accuracy, where higher values indicate greater confidence in the valuation estimates.
Behind the data
Tesla is currently the most overvalued stock in the Magnificent 7, reflecting heightened investor speculation, which earlier this month was fuelled by optimism surrounding Elon Musk's influence on President-elect Donald Trump’s administration. In contrast, the valuations of other companies in the group remain closer to their fair values, with smaller gaps in both percentage terms and standard deviations. This suggests that macroeconomic conditions have a more neutral impact on these companies.
Dollar positioning and DXY performance reflect mixed market sentiment
What the chart shows
This chart presents non-commercial dollar positioning across various foreign exchange (FX) rates alongside the quarterly performance of the DXY index, a measure of the US dollar’s value against a basket of major currencies. It provides a visual representation of how speculative market positioning and dollar index performance have evolved over time.
Behind the data
Since the US election, forex have shown unexpected mixed patterns, with the USD experiencing a notable surge. This increase was driven by investor apprehensions over tariffs, trade wars and rising bond yields, leading to a reassessment of expectations for US rate cuts. The euro and the Mexican peso were particularly impacted, each declining by approximately 2.8%.
Despite the dollar’s strength, speculative positioning reflected a mixed outlook. Gross USD long positions against eight International Monetary Market (IMM) futures contracts remained steady at USD17.5 billion, suggesting hesitancy around further dollar appreciation. This stability reflected offsetting movements, such as speculators covering short positions in the euro and sterling, which reduced overall short exposure by USD1.9 billion and USD0.9 billion, respectively. Meanwhile, net selling pressure concentrated on the Japanese yen and the Canadian dollar. Interestingly, the Dollar Index shifted to a net short position of 2,322 contracts—a level not seen since March 2021. This suggests market participants are exercising caution, balancing concerns over the dollar’s recent strength with skepticism about its continued rise.
Falling job quits eases pressure on the Fed
What the chart shows
This chart highlights key labour market dynamics and their implications for inflation and monetary policy. The navy line represents the three-month moving average of the Federal Reserve Bank of Atlanta’s median nominal wage growth, while the green line tracks the US job quits rate shifted nine months ahead. The semi-transparent navy line illustrates predicted nominal wage growth based on the quits rate, accompanied by a shaded 95% confidence interval for the prediction. A dotted line at about 2.25% marks the pre-GFC average nominal wage growth, capturing a historical inflationary baseline.
By visualizing this predictive relationship, this chart shows how changes in job quits—a proxy for worker confidence and mobility—can influence wage growth. This, in turn, sheds light on future labour market trends, inflation dynamics and the potential trajectory of Federal Reserve (Fed) monetary policy.
Behind the data
Declines in the job quits rate signal shifting labour market conditions that may lead to slower wage growth. Lower quits could reflect reduced worker confidence, limiting their ability to negotiate higher wages or seek better-paying opportunities. Increased labour force participation also increases the labour supply, easing wage pressures.
These factors collectively stabilize employment conditions and costs. In the current US context, the decline in quits suggests nominal wage growth may drop below 4% in the coming months. This projection aligns with a potential loosening of the Fed policy, as slower wage growth could reduce inflationary pressures, giving the Fed room to ease monetary conditions.
China’s tightening financial and monetary conditions weigh on credit growth
What the chart shows
This chart illustrates the relationship between China's financial and monetary conditions and total loan growth from 2011 to 2025. The YiCai Financial Conditions Index captures variables such as interest rates, sovereign term spreads, interest margins and asset prices. The Monetary Conditions Index is derived using principal component analysis (PCA) and incorporates key indicators including loan prime rates, the reserve requirement ratio (RRR) for large banks, lending rates and government bond yields.
By visualizing the interplay between these metrics, the chart highlights how China’s financial and monetary factors influence credit growth and, by extension, the broader economy. It helps contextualize the effectiveness and trajectory of policy interventions, shedding light on the challenges China faces in balancing economic stability with growth.
Behind the data
Since the GFC, China’s financial and monetary supports have gradually decreased, as reflected in the year-over-year changes in financial and monetary conditions. This trend aligns with the moderation in overall credit growth, shown by the downward trajectory of the blue line. Recent economic developments suggest that China's policy adjustments have become more cautious, with skepticism surrounding the effectiveness of large-scale stimulus. This underscores the challenges in sustaining robust growth amid global uncertainties and structural transitions.