Is the S&P 500 Really Up over 25%?
Context, in our business, is often lost given the industry’s focus on quarterly and annual reporting.
Why is context important? Because it helps investors better understand their actual performance.
Below are two versions of the truth. Version 1 is widely reported by the media. Version 2 is not widely reported, but likely mirrors most investors’ experience.
Version 1: Below is a chart of the S&P 500 and EAFE* indices from 1/1/2019 – 12/9/2019. It’s true, the S&P is up year-to-date +25.59% and the EAFE Index +16.25%, per the chart below.
Version 2: It’s also true that the S&P Index is up 6.91% and the EAFE Index down -0.39% since peaking on 9/20/18 through 12/9/19.
As you can see, it matters how and when you measure. So, if you have allocations to US and international equities, you can expect a return somewhere in between.
Another Point of Context
Another key consideration that is also widely overlooked is that most investors are not just invested in the S&P 500 index.
Many have allocations to US and international equities, which means you can expect a return somewhere in between the -0.39% and the +6.91%.
Additionally, most have allocations to bonds – or at least they should. The Barclay’s aggregate from 9/20/18 – 12/9/19 is +6.83%, almost identical to the performance of the S&P 500 Index.
Unfortunately, most media outlets don’t talk much about international equities or bonds. Doing so would certainly help clear up some of the confusion.
Less Noise
The world of finance and investing can be “noisy.” Our goal is to bring clarity and transparency to an often-opaque landscape.
Contact us if we can help.
*EAFE – Europe Austral-Asia Far East Index, the benchmark used for international equities.