A Tale of Two Markets

We just got back from a quick trip to the beach.  Melanie had wanted to take her good friends to the beach, and they had a wonderful time making memories as they close out their junior year of high school together.

(Melanie’s version)

While their trip was filled with sleeping in, surfing, strolling the beach…our version of the trip was very different. We took our dog Bailey for her first ever road trip and beach visit.  So, our trip was dog…dog, dog, dog.  Taking Bailey for walks on the beach, hanging out with Bailey on the porch, sitting with Bailey on the beach.  Lots of Bailey. 😊

A photos of a dog on the beach

(Our version of the trip)

Same beach…very different experiences!

It is a similar story with the stock market this year.  While the S&P 500 is up almost 10% so far this year, many investors have had VERY different experiences.

Bespoke Investment Group offers very insightful analysis of the stock market and current trends, and they have highlighted three huge market discrepancies in 2023.

  1. Large stocks are crushing small stocks this year.  Bespoke notes that over the last three months, the 50 largest S&P 500 companies are up on average over 9% while the 50 smallest companies in the S&P are down over 10%!
Source: Bespoke Investments


  1. The tech companies of the Nasdaq are trouncing the equal weight S&P 500 index (where every stock holds the same weight in the index)—NASDAQ stocks are up over 18% while the equal weighted S&P 500 index is barely positive:
Source: Horizon Investments
  1. Stocks that do not pay a dividend are outperforming stocks that do pay a healthy dividend to shareholders.  Across the 1,000 largest companies in the US, the 300 stocks that do not pay a dividend were up an average of 9% while the 230 stocks that pay a dividend of 3% or more are down an average of 5% for the year!

So, for investors that own a diversified mix of stocks, the year-to-date portfolio returns are not matching the index returns—same market, just different experiences.  Being diversified means you will always own something you hate…this year, we are mad to own small cap, non-tech, dividend paying stocks… 😉

But diversification does work, even when it doesn’t feel good.  Blackrock illustrates this so well on this slide:


Because diversification cushions portfolios on the downside, it helps to improve the total return of a portfolio over time, smoothing the ride and making the investment experience more enjoyable…


(Same beach path…different trips…)

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