Broker Check

Market Data Bank

3rd Quarter 2013

A dollar invested in the S&P 500 stock index for the five years ended 9/30/13 appreciated in value to $1.60 — a 60% gain. Anyone smart enough to invest it all in mid-cap growth stocks gained 88.3%.

The five- and 10-year annualized return on companies — large and small, growth or value — is not too far below the seven-decade historical average of 10.5%. That’s a remarkable comeback from the financial crisis.

The tech sector in 3Q13 roared ahead of all other industries, but that is raising concerns that the sector is overvalued. The divergence in returns on the different sectors tells you why broad diversification is important.

In the five years ended 9/30/13, four of 12 major asset classes lost value while eight posted positive total returns. Master Limited Partnerships, an asset class that did not exist a decade ago and mainly invests in oil and gas companies, trounced all asset classes in five-year cumulative returns.

Estimated S&P 500 earnings per share as of 9/26/2013 was $110.18 for 2013 and $122.62 for 2014. The positive earnings outlook remained in place at the end of 3Q13. Unexpected events could derail earnings and prices, but fundamentals remained positive.

In the 5-years ended 6/30/13, U.S. stocks outperformed foreign stocks, as the U.S. economy far more resilient than most foreign markets. Ironically, that’s made globally diversified portfolios look bad versus U.S. stocks. But that’s a price you must pay for diversification.

Past performance does not indicate future results. ± Indices and ETFs representing asset classes are unmanaged and not recommendations for any specific investment. Foreign investing involves special risks, including political or economic instability and currency fluctuation. Bonds offer a fixed rate of return while stocks fluctuate. ¥Actual S&P 500 index data through 6/30/2013 and actual earnings through 3/31/2013. Estimated 2013 and 2014 S&P 500 earnings per share as of July 24, 2013. Sources: Yardeni Research, Inc. and Thomson Reuters I/B/E/S survey of consensus estimates; Standard and Poor’s for index prices through 6/30/2013 and actual earnings data through March 31, 2013.