With the S&P crossing the 2900 mark, it’s back in all time high territory, but many investors aren’t experiencing anywhere near the 7.2% return the S&P has posted this year.
This can be frustrating for some investors, but if you had a diversified portfolio, this is one of the years you may be paying the price for being diversified.
Here are some of the reasons diversified portfolios are struggling:
- Growth vs. Value – this year has provided a stark contrast in performance between the high flying, tech stock driven growth sector and the stalwart, old-faithful type value stocks. The Russell 1000 Growth Index has returned an impressive 13.4% this year while the Russell 1000 Value index has piddled along to a 2.3% return. Since the day after the election in 2016, Growth has outperformed value 49.7% to 18.74% on a cumulative return basis.
- Europe and Emerging Markets – Our piece two weeks ago sought to explain part of why international investments are down. Most of the hurt is from emerging markets whose MSCI index is returning -8.96% to date this year. Developed markets are doing a little better, but still not helping with a return of -2.09%.
- Bond Market Struggles – We’ve been waiting for interest rates to go up for years now and they finally have which has dropped the US bond market to a -1.94% return so far.
What all of these numbers boil down to is that investments across most asset classes are looking pretty sluggish this year. The S&P Target Risk Growth index which is a diversified 60% Stock 40% bond portfolio is returning 1.72% through September 19th.
Now we understand we’re generalizing here, and you aren’t all allocated like we’re stating above, but we wanted to give you an idea how the year is going for investors in general. As always, it’s about understanding how much risk you’re comfortable with in your investments and knowing that some years that’s going to mean not keeping up with what you see in the news.