2021 - Volatility, Stocks Struggle
2021 – VOLATILITY, FAILED RALLIES, FLAT RETURNS
NEGATIVE RETURN WITHOUT THE TOP 5
S&P Global Market Intelligence produced the following chart December 6th, 2021 outlining how narrow the market was in 2021. The chart below outlines how the 2021 return for the NASDAQ was negative if the 5 largest companies were excluded, in many cases these 5 stocks are some of the most expensive stocks in the market.
This happened in 1999, which was a narrow market before the 2000 through 2003 bear market. 1999 represented a blow off top, many believe that 2021 was a blow off top as well.
2021 FLAT AND VOLATILE ALL STOCKS EQUALLY WEIGHTED
The Value Line Geometric Index represents the largest 1,600 in the United States, equally weighted. This is important because an equally weighted index removes the skew that can be caused by a few mega cap stocks. Volatility ranging between -10% and -15%, almost all of 2021’s gains have disappeared within a few weeks.
Consistent volatility like this can cause a build up of single digit losses. If stock returns were broad, where many stocks were moving up, we would have seen a consistent uptrend. Instead the price gains are non existent, all rallies failed in 2021.
2021 SMALL CAPS
Small cap stocks represent the health of the domestic US economy, a flat and volatile return in my opinion signals caution by investors. Small cap stocks traded in a wide range, recently falling -16%. The S&P 600 Small Cap Index’s price action does not convey confidence, rather it represents indecision.
2021 FAANG+ INDEX FAILS TO GENERATE RETURNS
The leadership group over the past 10 years has been the index holding the FAANG+ stocks, the largest (and in some cases very expensive). This index has been volatile and all the rallies have failed.
2021 GROWTH AND VALUE – FAILURE TO GENERATE A RETURN
Combining the S&P 500 Citigroup Pure Value and the S&P 500 Citigroup Pure Growth provides us with a visual that tells us how a portfolio split between those two indices has done. We see that early losses were recovered but have been stagnant. This price action reinforces what the other indices have told us; volatility, indecision, lack of strength and gains.
DON’T BE SURPRISED
When looking at your returns for 2021 do not be surprised if accounts are flat to slightly down.
Note: past performance is not an indication of future results and expectations might not materialize. Current investor concerns could evaporate as fast as they occurred.
LPL 1-05247013
DEFINITIONS
NASDAQ Composite Index - is the market capitalization-weighted index of over 2,500 common equities listed on the Nasdaq stock exchange. The types of securities in the index include American depositary receipts, common stocks, real estate investment trusts (REITs) and tracking stocks, as well as limited partnership interests. The index includes all Nasdaq-listed stocks that are not derivatives, preferred shares, funds, exchange-traded funds (ETFs) or debenture securities.
NYSE FAANG+ Index - An index that provides exposure to 10 of today’s highly-traded tech giants. The index launched on 09/26/2017, prior performance (09/19/2014 to 09/25/2017) is based upon backtested index calculations. Gross total return variants are shown for all of the indices in the chart. The NYSE FANG+™ Index is an equal-weighted index.
S&P 500 Citigroup Pure Growth Index - The index measures growth stocks using three factors: the ratios of book value, earnings, and sales to price. S&P Style Indices divide the complete market capitalization of each parent index into growth and value segments. Constituents are drawn from the S&P 500®.
S&P 500 Citigroup Pure Value Index - The S&P 500® Pure Value index is a style-concentrated index designed to track the performance of stocks that exhibit the strongest value characteristics by using a style-attractiveness-weighting scheme.
S&P 600 Small Cap Index - The S&P SmallCap 600® seeks to measure the small-cap segment of the U.S. equity market. The index is designed to track companies that meet specific inclusion criteria to ensure that they are liquid and financially viable.
Value Line Geometric Index - The Value Line Composite Index is a stock index containing approximately 1,675 companies from the NYSE, American Stock Exchange, Nasdaq, Toronto, and over-the-counter markets. The Value Line Composite Index has two forms: The Value Line Geometric Composite Index (the original equally weighted index) and the Value Line Arithmetic Composite Index (an index which mirrors changes if a portfolio held equal amounts of stock.)
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