October is over and it would appear that the correction is over as well. After dismal August and September performance, October saw the S&P 500 gain over 8% in that one month alone. This made it easily the best performing month for stocks in the last four years. However, even with the help of a strong October, the year-to-date performance figures are still fairly modest. The bond side of the portfolio did very little to help matters as the Barclays Aggregate Bond index was flat for October and only up 1.20% for the year.1
Looking at the positive returns shown on the barometer below, you might not recognize that there is still quite a bit of disparity in equity performance this year. As seen in the square chart, Small Cap stocks are down sizably compared to large caps. Value stocks are significantly under performing relative to growth stocks. Buying the bargain stocks with the low P/E ratios have not paid off in 2015 since many of those stocks are still down for the year.
Looking at stocks based on their industry also brings to light some other disparities. With energy prices continuing to stay low, that industry has obviously been hit the hardest. Surprisingly, with our pensive economic growth, consumer discretionary stocks are the stand out companies thus far in 2015 with technology stocks a distant second. Biotech and healthcare stocks are doing well also and will be our managed clients’ heaviest concentration going into the last two months of the year.
We did not believe the late summer correction would be a significantly drawn out event. Our patience seems to have been rewarded fairly quickly, but it is not often the case. We wish the markets would behave more rational, but it is the volatility and disparity of returns that makes the risk of owning stocks so rewarding in the long run.
Let us hope for a profitable beginning to the holiday season!
Index information is used to represent market performance, but you cannot invest directly in an index. Past performance is not indicative of future results.
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