Markets Right Now Update

The market closed Friday down 915 points! So, after this week's rally, where are we? The chart below shows the returns for the major asset classes since the start of the year. As always, rather than show the indexes, which you cannot buy, I prefer to show the index ETFs*, which can be bought by any investor!

Source: Yahoo Finance*

BND=Vanguard Total Bond Fund

QQQ=Invesco QQQ Trust

SPY=SPDR S&P 500 ETF

IWM=iShares Russell 2000 Index

The chart above shows where we are as of yesterday's close. Note the charts above AND below show the change in value of $1000 invested at the beginning of the year. 

Bonds are flat, stocks are down, small stocks (represented by the Russell 2000 ETF IWM) down the most and for good measure, I am adding, below, returns of two commodities important to many people: gold and crude oil.

Source: Barchart.com

GCZ=December 2020 Gold

CLZ=December 2020 Crude Oil

Here's what the numbers look like:

*Note "drawdowns" measure the decline from the market's highs. Maximum drawdown measures the percent drop from high to low, Current drawdown measures the percent decline from high to today's price. 

The IWM had the largest stock market drawdown, -41%, versus the SPY's -34%. Bonds performed well providing the downside protection investors expect. QQQ, surprisingly, had a little LESS risk than the S&P. 

What's interesting to me is that stocks recovered nearly a third of their losses between the lows and yesterday. Note bonds and gold are barely down while crude oil, in the throes of a price war, is down a dismal -43%! 

*One advantage of using Yahoo Finance data is ANYONE, using symbols or search, can download daily historical data for free and see for themselves. I use "Adjusted close" data to include the value of distributions, if any. Finally, I have a problem using proprietary or obscure data. Note any data errors WILL be reflected when the data is used. Barchart.com, in my opinion, is the best source for futures prices that average investors can get. 

Feel free to post comments.

Disclaimer: Posts are for education only and not investment advice, may be subject to change without notice, and, while prepared with care, may be subject to omissions and errors.

A word on bias

Those who follow my posts see that I am biased toward broad-based stock index funds and against actively managed funds, or buying individual stocks, for that matter. So that begs the questions, exactly which index, which fund and which wrapper (mutual fund or ETF)?

Last Day of the Year-The Best Day to Buy

Most investors have heard of the "January effect" or "triple witching" day but there's little mention of the last day of the year, THE best day to buy!

Next Tuesday 12/31/2019 at 4 PM funds, stocks and everything else will close on the last day of the month/year/decade and a new "bogey", target or gauge for performance will be set for every investor. Money managers are laser focused on getting the highest one year, three year, five year, ten year and (for the young at heart) twenty year returns for their funds.

The 20 Year Indexes chart below shows the 20 year continuously compounded gains for the major investment indexes starting at 1000 on the close 20 years ago, 12/31/1999-the beginning of the new millennium. One would guess that the Russell 2000 index would be the way to go!

The One Year Indexes chart tells a different story.

The NASDAQ index was the top performer this year, while everything else, except commodities, were all competitive. Different time periods create different winners. IMHO the S&P 500 index is the ideal long term index for nearly all investors.

The continuously compounded rolling returns show this clearly:

Source: Yahoo Finance as of the close Friday, 12/27/2019

The moral of the story is that the index you buy doesn't matter all that much as long as you buy and hold for the long term. Take and pick and, excepting the BCOM commodity index, get your decent long-term gains!

Feel free to post comments.

Disclaimer: Posts are for education only and not investment advice, may be subject to change without notice, and, while prepared with care, may be subject to omissions and errors.

New Highs Are BACK!

New all-time closing highs came within reach this past week to the major stock indexes. Not all joined the party; mainly the Russell 2000 small stock index was left out.

NASDAQ=NASDAQ Composite Index

DJIA=Dow Jones Industrial Average

S&P 500=S&P 500 Index

RUT=Russell 2000 Index

Rolling returns are surprisingly mixed:

Continuously compounded annualized returns.

Source: Yahoo Finance historical data.

The one year numbers are weak, reflective of obvious instability. Two to 10 year returns reflect the recovery from the depths of the market recession. The 20 year comps take us to before the dot-com bust and the 30 year annualized rates of return are the familiar expected long-term rates for the stock market. 

After last Sep 30's peak and the scare from last Christmas, we can all let out a sigh of relief that the market has recovered and so have our Vanguard accounts. But what about all our other accounts? What if we SOLD at the bottoms, likely, or were never in the market to begin with, more likely... What to do on tomorrow's opening?

Since there IS no right answer, the only answer left is the only good answer the market ever had since creation of the first index fund in 1975*. Buy and hold an index fund. Scale in and only sell when you need the money, otherwise ignore the prices, the headlines, the hucksters, the annuity salesmen, the noise and all the advisors who seek to justify unnecessary commissions or fees or whatever, and stay the course owning the broad based indexes in this ever changing shape shifting American stock market.  

*A case can be made, a strong case, that "growth and income" mutual funds from the 1920s-1950s were, given their long-term diversified investment policies, in effect "index" funds. 

Feel free to post comments.

Disclaimer: Posts are for education only and not investment advice, may be subject to change without notice, and, while prepared with care, may be subject to omissions and errors.