Market Excesses and Irrational Behavior

Markets are hitting new highs justified by strong earnings growth and reasonably solid economic performance in this tenth year of the expansion. Absent the traditional economic warning signs, equity markets are exhibiting some unnatural distortions. The stock market is becoming quite concentrated in a select group of growth names, and investors appear overly willing to invest in growth stories across the capitalization spectrum. Investors should continue to position portfolios to participate in ongoing growth, but should be building in an appropriate degree of protection and a tilt toward value over growth.