Your Weekly
Financial Forecast

Fixed Income ETFs for the Win

Today’s chart comes from VettaFi. Fixed income exchange traded funds (aka ETFs) have taken in over $1 trillion in assets over the last seven years, and only had three months of outflows.

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Hold On To Catch the Upside

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Recessions are Painful; Expansions are Powerful

This chart comes from the Visual Capitalist. Since 1950, the average economic expansion lasts 67 months. The average recession, though painful, only lasts 11 months.

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Small- and Mid- vs. Large-Cap Stocks

As of today, small- and mid-cap stocks on a year-to-date basis are performing better than their large-cap counterparts by 3% and 2%, respectively.

There is an ebb and flow but going all the way back to 1994 small- and mid-cap stocks have outperformed large-cap stocks by an annual 0.66% and 1.49%, respectively. Financial theory supports, and so far this year it is also true, that when you add them to your portfolio they lower your risk due to the additional diversification.

Since this follows our motto of obtaining the “highest returns, for the least amount of risk,” we include small- and mid-cap stocks in all our portfolios.

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The "Chiclets Chart"

One of our clients calls this the “Chiclets Chart” because of its resemblance to that classic brand of candy-coated chewing gum.

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Active vs. Passive Funds

Today’s chart from Morningstar shows annual net flows into passive funds (in purple) vs. active funds (in orange), and their dominance for the last 11 years.

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37 Years of Retirement

Today’s chart from BlackRock shows that from 1940 to 2015 life expectancy went up 15 years and the average years spent in retirement went from six to 37.

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May 2022 Market Update

Below are a couple of my thoughts on the market. 

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Top Heavy = Top Losses

This chart is from today’s Wall Street Journal. Because of their heavy weights in the S&P 500 index, eight companies make up half of the stock market’s 14% decline year to date. It is notable that the value index was only down 3%, while the technology-heavy growth indexes are down 25%. As usual, the S&P 500, which includes both, splits the difference.

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Diversification Saves in Down Markets

The Russell 3000 Index is made up of the largest 2,750 stocks in the United States.

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Daily Median Income for World

From 2001 to 2017, the daily median income doubled for everyone in the world.

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Selling Low

The rule of thumb is to buy low and sell high.

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Winning is Hard, Staying a Winner is Even Harder

S&P Dow Jones Indices has published their updated U.S. Persistence Scorecard. A mere 2.2% of actively managed U.S. domestic equity funds in the top quartile for 12 months performance at the end of 2019 stayed ahead of three-quarters of their peers when measured two years later.

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Real Estate vs. Stock Market

Past performance is no predictor of future success, but it is interesting to compare the past performance of different investments.

These charts show the value of $100 invested in real estate (red) and the stock market (blue.)

The chart above shows that over the last 15 years, the stock market was the place to be.

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Best vs. Worst

Some investment managers promote a strategy called “Sector Rotation” where they try to time the market by trading between the 11 major sectors of the economy. The gains can be tempting, but the risk is high. For instance, if you owned all energy stocks, you would be up +40% year to date, but if you thought communications was the place to be, you would be down -20%. This is a possible difference of 60% in your returns. According to the chart, which includes more sub sectors, the difference is the highest since 2000.

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