A Great Divergence in the Market & What You Should Do

 

Video Transcript:

Hi this is Dave Shepherd with Shepherd Wealth and Retirement

Just wanted to go over something real quickly with you that’s happening in the markets so far this year that you may or may not be aware of. And I hope your summer’s going a little bit like this and you’re having a good time and relaxing and maybe getting some more cool weather, or ocean breezes in this case, instead of being in Tucson the whole time.

But, what is going on in the market this year that’s a little bit different. And it’s been going on for a while. It has to do with the FANG stocks and the growth stocks that are driving most of the indexes up.

This slide is now about a month old, but what we see here in the red line is the Morningstar Large Growth Index. This is where all the action is right now really. And the S&P 500’s right here in the middle. And then Morningstar Large Cap Value and the Power Dividend Index is down here toward the bottom. And so dividend stocks, value stocks are having a tough year. Growth stocks is where all the action is. And so many times you look at that and say, well gosh, I don’t know if this strategy is not working. What should I do about that or is there anything I should do about that? And our point is usually no.

When you have a diversified portfolio, you want to have some of each of these. But we always also need to look at things always in a long-term context. So if we now flip to a 17-year picture of the same indexes as the one that everybody’s excited about and getting all the news lately is this red line down here at the bottom that has just barely gotten back past even from almost 17 years ago. We’ve got the S&P 500 Index, the green line again, Morningstar Large Cap Value Index, the purple line, and then we’ve got the Power Dividend Index going back all the way to the beginning of 2000. So again, this year is a little bit different. It’s almost like ’99-2000 when again, everything was tech and large growth and that was driving up. And dividend stocks were trailing, and a lot of people would, you know, trade almost anything–real estate, dividend stocks, whatever–to buy more growth stocks, and then the next three years were just devastating for those growth tech stocks. And hopefully that won’t happen again. But it could. So just wanted to make you aware of what’s going on. Think about the long term.

Hope you’re having a great summer. If you have any questions, give us a call.

Thanks very much for watching.

Please note: The “FANG” stocks I mention in the video stand for Facebook, Amazon, Netflix and Google (now Alphabet, Inc).

About Dave Shepherd, ChFC, CFP®

Dave is the founder of Shepherd Wealth & Retirement in Tucson, Arizona. Dave is a Chartered Financial Consultant (ChFC) and Certified Financial Planner™ practitioner (CFP®). Have a financial question? Click Here to contact Dave Shepherd.

Investment advice offered through Shepherd Wealth Group, a Registered Investment Adviser doing business as Shepherd Wealth & Retirement.

©2014 Shepherd Wealth Group, Inc. 6300 E. El Dorado Plaza, Suite A200, Tucson, AZ 85715 | Phone 520-325-1600 Fax 520-325-9097 Disclosures