Common Cents

by | Feb 18, 2020 | WWC WorthWhile Reading

Last Week…

Last year, the market was strong and broad.

  • Large Growth: 36.22%
  • Technology: 47.47%
  • Smaller companies also participated, some in the high 20’s%
  • Foreign Stocks also were high performers: Mid-teens to upper 20’s %
  • Oddly, bonds also posted exceptional gains from mid-single digits to lower double-digits.

Individuals with globally diversified portfolios saw some of the best overall annual returns since 2009 (The first year of this 10-year bull market).

However, this doesn’t mean best risk adjusted returns, which takes into account how much risk came with the return.

Now getting back to the current year.

Imagine you are at the beach watching the surf come in. As the ocean swells approach land they begin to squeeze closer together, grow higher and narrower till they crash over on themselves creating the surf we’re so familiar with. This is because as the swells approach land there’s less water to absorb the wave with increasingly shallower water coming to the shore.

The stock market is like this in many ways. Often following a very broad and strong market, a number of investors may shrink back fearing too much of a good thing. Worries begin to overtake the good that’s just been experienced. Those that are left may tend to crowd into only the best-known market leaders like the Tech giants: FAANG (Facebook, Amazon, Apple, Netflix and Google).

Exactly what’s happening now.

  • YTD Large Growth: 9.21%
  • Technology:  11.18 %
  • S&P: only 4.87 %
  • all other US stocks below 5%; Small Value is negative.
  • Foreign even worse: Large Growth only positive; all others negative YTD.

Of course, the worst case for a narrowing of the market is a crash just like the surfing waves, but this is not a necessary outcome. If the narrowing were to continue AND very few stocks were to rocket irrationally high – then watch out! That is frequently what it looks like at the beginning of a bear market but, That is NOT what we believe we’re seeing happen now!

Have a great weekend!


Indexes are listed in respective order to their reference above: DJ Industrial Average TR USD, S&P 500 TR, DJ US TSM Large Cap Growth TR USD, NASDAQ 100, Technology NTTR TR USD, DJ US Health Care TR USD, DJ US TSM Large Cap Value TR USD, DJ US TSM Mid Cap Growth TR USD, DJ US TSM Mid Cap Value TR USD, DJ US TSM Small Cap Growth TR USD, DJ US TSM Small Cap Value TR USD, FTSE NAREIT All Equity REITs TR, DJ Gbl Ex US Select REIT TR USD, Bloomberg Commodity TR USD, MSCI EAFE NR USD, MSCI EAFE Growth NR USD, MSCI EAFE Value NR USD, MSCI EAFE Small Cap NR USD, MSCI EM NR USD, BBgBarc US Corporate High Yield TR USD, FTSE WGBI NonUSD USD, JPM EMBI Plus TR USD, BBgBarc US Govt 1-3 Yr TR USD, ICE BoafAML 1-3Y US Corp TR USD, BBgBarc Intermediate Treasury TR USD, BBgBarc Interm Corp TR, BBgBarc US Treasury US TIPS TR USD. These materials have been prepared solely for informational purposes based upon data generally available to the public from sources believed to be reliable. All performance references are to benchmark indexes. Performance of specific funds will vary from respective benchmarks. Past performance is not an assurance of future results. Each index cited is provided to illustrate market trends for various asset classes. It is not possible to invest directly in an index. Neither do Indexes reflect individual investor costs, e.g. trading, expense ratios & potential advisory fees.