Quarterly Market Update: All That Glitters is Gold…

This has been a strange period in that both traditional bonds AND stocks are down around 7%-8% simultaneously. Historically, if stocks were down like this bonds would at least be holding up, if not appreciating, and vice versa.

A couple months ago I wrote a commentary about why we own treasuries in portfolios referencing the fact that since 1928, treasuries and stocks have only been down simultaneously in the same year three times! Historically, stocks and treasuries have been great complimentary, non-correlated assets. In fact, they have about a negative 0.40% correlation.

At this point, if nothing were to change for the rest of the year, we could have our fourth year in almost a century where both bonds and stocks are down simultaneously. Continue reading “Quarterly Market Update: All That Glitters is Gold…”

BRIEF: Year End Market Returns Summary

What a year.

The widely followed S&P 500 index ended 2020 over 16% higher (18.4% total return w/ dividends) than it began the year even as it experienced one of the sharpest 34% declines in history (mid-February to mid-March).

The U.S. stock market managed a great year even in the midst of a global pandemic that saw businesses shut down, tens of millions of people lose their jobs, spike in corporate defaults, a steep recession (we’re still in BTW) and S&P 500 earnings that declined 13.6% from the prior year.

This means the entire increase in the S&P 500 was from expansion of the Price/Earnings multiple to over 30x, which is a level ONLY seen throughout history in the Dot-Com Bubble and Great Financial Crisis. The long-term average is about 16x. Continue reading “BRIEF: Year End Market Returns Summary”

Market Concentration Update and Action Items

About a month ago I commented on the record concentration in the top 5 names of the S&P 500.

I want to briefly follow up on that and also summarize some action items I’m taking within portfolios.

This updated chart from Charles Schwab shows that concentration in the top 5 names has now reached 22% of the entire S&P 500!

top 5 stocks weight of S&P 500

Source: Charles Schwab, Bloomberg, as of 6/30/2020. Past performance is no guarantee of future results. Continue reading “Market Concentration Update and Action Items”

2020 is the “Anti-1980”

2020 is the “Anti-1980” or as Seinfeld might say, the “Bizarro-1980.”

Baby Boomers and the Silent Generation enjoyed a wonderful investing era as they were hitting their career stride, and investing the bulk of their retirement savings, throughout the 1980s and 1990s. Contrast that to Millennials who may be hitting their stride now and starting to put decent money away. It’s really a stark contrast in the market environment between the two eras.

Below is a quick graphic comparing stock market valuations and total debt load within the U.S. economy between 1980 and 2020. The differences are obvious and significant. I’ll summarize below the graphic.


Continue reading “2020 is the “Anti-1980””