View from the Observation Deck

1. Today's announcement by the Federal Reserve that it intends to initiate a third round of quantitative easing (QE3) was well-received by the equities markets.
2. Over the past five years, retail investors have liquidated hundreds of billions of dollars from domestic equity funds in an attempt to reduce risk and preserve capital.
3. We believe that stocks, particularly large-caps, are undervalued, and we think that the data in the chart helps support our claim. 
4. The non-financial companies in the S&P 500 still hold a near-record $1.12 trillion in cash and equivalents (see chart for sector breakdown). Corporate America is "lean and mean", in our opinion.
5. On top of being well-capitalized, many of the major sectors (other than Financials) in the S&P 500 offer double-digit earnings growth expectations for 2013 (see chart).
6. The majority of the price-to-earnings ratios (P/E) based on 2013 projected earnings (see chart) are markedly below their respective historical averages.
7. To illustrate this point, the S&P 500's P/E averaged 16.78 over the past 10 years, according to Bloomberg. Its 2013 estimated P/E is currently 12.42, according to S&P
8. We believe that these data points should be compelling enough to entice the skeptics to take another look.