Capital Markets: Winter 2019

​ Sanguine About Slowing

A Silver Lining?

• Historically, returns have been robust after such episodes ‒ Annual returns have averaged 19% after double-digit declines in P/E

• Equity valuations declined dramatically in 2018

‒ Second largest decline in past three decades

Change in S&P 500 P/E

Double-Digit S&P 500 P/E Declines

40%

P/E Change Following Year Return

50%

30%

40%

20%

30%

10%

20%

0%

10%

-10%

0%

-20%

-10%

-21%

-30%

-20%

-30%

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

1987 1994 2000 2002 2005 2008 2018

Source: FactSet and Alger. Data is 1986-2018.

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