Stock Market YTD Returns Look Robust– if You Only Consider Certain Tech Stocks
After a tumultuous 2022 for both the stock market and the bond market, 2023 looks to be recovering nicely– or, is it?
Here are the market news stats through the end of May 2023.
| Index | YTD Total Return Through 05/31/2023 |
12 Mo Total Return Through 05/31/2023 |
From All-Time High |
| Dow Jones Industrial Average | 0.25% | 1.96% | -10.9% |
| Bloomberg US Aggr. Bond Index | 2.46% | -2.14% | N/A |
| S&P 500 Index | 9.65% | 2.92% | -13.2% |
| NASDAQ Composite Index | 24.06% | 8.04% | -20.2% |
| NASDAQ Global Technology Index | 33.44% | 13.75% | N/A |
| Sample Company | YTD Total Return Through 05/31/2023 |
12 Mo Total Return Through 05/31/2023 |
From All-Time High |
| Nvdia | 158.9% | 102.5% | -8.2% |
| META Platforms | 119.9% | 36.7% | -35.8% |
| Advanced Micro Devices | 82.5% | 16.0% | -28.1% |
| Amazon | 43.5% | 0.31% | -36.0% |
| Microsoft | 37.5% | 21.7% | -6.0% |
| Apple | 36.7% | 19.7% | -3.8% |
| DOW | -0.4% | -24.3% | -32.1% |
| Home Depot | -8.9% | -3.1% | -32.6% |
| Honeywell | -9.6% | 1.0% | -19.1% |
| Nike | -9.7% | -10.3% | -41.2% |
| Caterpillar | -13.1% | -2.4% | -22.6% |
| 3M Company | -19.6% | -33.4% | -56.5% |
Market News:
Phenomenal or Mediocre Performance?
Depending on the stock index you look at, the “market” is either having a phenomenal year or a flat to mediocre year. Comparing the technology-laden NASDAQ Composite index versus the Dow Jones industrial Average illustrates how extremely bifurcated the stock market is today. A handful of large technology company stocks are recovering from substantial losses in 2022. That handful of names is raising the returns on entire indices, like the market cap weighted S&P 500 and NASDAQ Composite. Today’s market news is reminiscent of the late 1990’s dot-com market.
On the other hand, the Dow Jones Industrial Average (DJIA) is a price weighted index, and the DJIA includes only a few technology stocks. It also includes a number of non-technology companies. The combination of non-technology stocks and not enough high-flying technology names has so far failed to push that stock index price up even 1% in 2023.
Further analysis of the “big winners” so far this year reveals that while some have rebounded to recent new highs, others are still significantly below their all-time high prices from several years ago.
Market News:
Take the Long View
An investor looking only at year-to-date returns in the NASDAQ Composite Index or even the S&P 500 Index might tend to respond to a sensation called FOMO or Fear-Of-Missing-Out. Market news appears rosy, and who wants to miss potential future returns?
Benjamin Graham, the legendary author of The Intelligent Investor is reported to have said,
“In the short-run, the market acts like a voting machine, but in the long-run it acts as a weighing machine.”
Expanding Mr. Graham’s voting machine analogy, one might say that FOMO is the condition that drives “votes.” We believe, like Benjamin Graham and even Warren Buffet, that long-term investment success still involves:
- fundamental research
- prudent company selection
- buying at prices that offer a “margin of safety”
- attempting to limit downside risks through diversification
Market News:
Our Outlook
Market observers should be mindful that it’s usually two or three popular indices that make market news headlines representative of the “stock market.” Membership in the indices and how member stocks are weighted in each index can, at times, skew the performance results of an index.
The meteoric rise of a handful of stocks brings to mind another sage quote from Stein’s Law,
“If something cannot go on forever, it will stop.”
Remember, in the Tortoise and the Hare, it’s the tortoise that wins in the end.
For more market insights from Schmitt Wealth Advisers, view Our Outlook blog. To start a conversation about your financial future, contact us.
This material is provided by Schmitt Wealth Advisers, LLC for informational purposes only. It is not intended to serve as a substitute for personalized investment advice or as a recommendation or solicitation of any particular security, strategy, or investment product. Opinions expressed by Schmitt Wealth Advisers are based on economic or market conditions at the time this material was written. Economies and markets fluctuate. Actual economic or market events may turn out differently than anticipated. Facts presented have been obtained from sources believed to be reliable. Schmitt Wealth Advisers, however, cannot guarantee the accuracy or completeness of such information. Past performance may not be indicative of future results.
