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Why Aren't My Accounts Going Up as Much as the Market?

Investing

23 days after the election the Dow Jones Industrial Average is up 4.99% (as of December 1, 2016) and 13.03% year to date. Recent headlines include “Why the Rally by U.S. Stocks Is Just Getting Started”, “Trump Is Bringing the 1990’s Back to Markets”, and “Next Stop for the Dow: 20,000”. However, many are finding their accounts flat to slightly positive post-election. So what’s the deal?

If we learned anything from this year’s election it should be to understand selective reporting. The media’s goal is to increase viewer and readership, which often leads to part of the story and many times leaving out the most significant facts.

The most important item left out is what has happened in the Bond Market. With a bond, the price will drop as interest rates rise. This is just what happened. On November 8th the 10-Year U.S. Treasury bond yield was 1.86%. As of December 1st it’s yielding 2.44%.

If your advisor is doing his/her job they have mapped your investments solutions according to your long-term plan. For most people nearing retirement, this typically leads to a portfolio of 60% stocks and 40% bonds. Since the election this type of portfolio is down 0.29%, not the 4.99% represented by the Dow and promoted by the media. In reality the Dow Jones only represents 30 of the largest companies in the United States offering a weak at best total picture of the markets. To give you a clearer picture, here are index returns since the election through December 1st:



Clearly since the election, the only positive market returns are coming from US large and small companies. For a properly diversified portfolio international stocks and the entire bond market have been detractors in this short time period.

We hope this helps you understand why your accounts aren’t increasing as much as the media will lead you to believe. And for those portfolios properly diversified, when things turn the other way (and they always do) investors will again appreciate diversification and be surprised to see their accounts doing better than the media will lead them to believe.