The investing year is half over – and at least half full. The S&P 500 (Total Return) Index gained 4.28 % in the second quarter on top of the first quarter’s 10.56 % increase; bringing the gain for the first half to 15.29 %. Once again, the market was led by large cap technology stocks such as Nvidia, Apple and Microsoft.
In an interesting twist, Emerging Markets outperformed both US and non-US Developed Markets. The MSCI Emerging Markets Index gained 5% for the quarter and is up 7.49% YTD.
Fixed Income
Yields generally increased slightly over the quarter. The yield on the benchmark 10-year Treasury Note increased 16bps to 4.36%. The Bloomberg US Aggregate Bond Index eked out a .07% gain.
Some better news on the inflation front may cause the Fed to consider lowering rates earlier than anticipated.
Our friends at Dimensional Funds have all the nitty gritty in their Quarterly Market Review.
Catching Your Breadth
It’s starting to feel like a broken MP3 writing about the Magnificent 7 or however many remain on this rocket ship. Over 70% of this year’s gains have come from just 10 stocks; with 30% coming from Nvidia alone.
Having your diversified portfolio pulled along by a few behemoths feels pretty good while its happening. But the valuation disparity between large cap growth stocks and small cap value stocks is unhealthy in the long run and shouldn’t be ignored.
PS. The Russell 2000 Index of small-cap stocks surged 3.6% in just one day last week. Which may or may not be a sign of things to come, but it’s worth noting.
Jonathan Clements Receives Cancer Diagnosis
When you’ve been around as long as I have, you collect your inspirations and gurus. Every quarter now, one of mine seems to suffer some life tragedy or pass into the beyond. Today’s example is Jonathan Clements, blogger and author of eight books on personal finance, who just received and wrote somberly, but practically, about is own cancer diagnosis and how it is affecting his personal planning. It’s a sad read. But perhaps useful for putting our own planning foibles into context.
Oh, and the Election
While it can be difficult, it’s generally good advice not to mix politics with your portfolio. The outcome of the upcoming election will probably make a big difference in people’s lives, depending on who wins. The parties have vastly different economic platforms. And there could be turmoil surrounding tabulating the results.
But in the long run, politics has not played a significant role in portfolio prospects. This article, among many, is one of the more balanced and sober pieces on how you might think about your portfolio in the context of the upcoming election.
But Fasten Your Seatbelts
Given all the uncertainties, it makes goods sense to double check the riskiness of your asset allocation and make sure you have enough in cash and bonds and bonds to withstand any extended period of volatility should that occur.
