Change is in the air, and we’re not talking about frost on the pumpkin. Behind the recent flurry of excitement in the media about record highs for the Dow, an important investment story may be unfolding. For the first time in seven years, large capitalization stocks appear to be gaining ground relative to their smaller brethren. A curious overlay to this apparent shift is the contradictory economic scenarios implied by simultaneously surging stock and bond markets. Our sense is that the stock market is rationally rewarding the healthy cash generation capacity, strong financial position, and compelling valuations of the largest U.S. companies, despite the possibility of slower economic growth.

To continue reading this Newsletter, please click here.