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Author: ziggy29 Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76237  
Subject: Re: Russel2000 vs. S&P500 Date: 8/29/1998 12:00 AM
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Just keep in mind that the last few years have been a strange and divergent market, far more so than usual, and that the "Nifty Fifty" style large cap go-gos in the S&P 500 and elsewhere can't maintain outperformance forever unless their balance sheets are consistently better than most other classes of corporation.

The S&P 500, while the star index of the market, is way overpriced compared to the Russell 2000. Each day, I tell myself that the discrepancy in valuation can't become more skewed...but almost every trading day, it does. The pundits talk of a "correction" in the market; for the Russell 2000 and even some large cap value stocks, it ain't a correction: it's a bona fide bear market with the Russell 2000 down 1/3 from its highs in April.

That imbalance can't last forever. It may be nice to "ride it while it lasts," but when the market finally restores some balance (and it always does), I'd hate to put all my eggs into the Index 500 cart. Just the same, if you're index investing, that should still be a part of a long-term portfolio -- but I'd have indexes of other market sectors as well to cushion the fall when the bubble goes kablooey.

Anyone know the current P/E of the Russell 2000 compared to the S&P 500?

Tim
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