2010 Charts of the Week
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- Portfolio Risk Return Characteristics 20 Years Through July 2010
- MarketView Chart of the Week, posted September 3, 2010
- The chart above helps to further illustrate the possible benefits of diversification, showing the 20-year risk and return characteristics of the BarCap U.S. Aggregate Bond Index (representing a bond portfolio), the S&P 500 Index (representing a large-cap stock portfolio), the Russell 2000 Index (representing a small-cap stock portfolio), and two portfolios that combine the indexes to produce Mixed Portfolios 1 and 2. Mixed Portfolio 1 represents the same mixed portfolio from the August 20, 2010 chart.
- Compounding Effect of Dividend Reinvestment (as of 7/31/2010)
- MarketView Chart of the Week, posted August 27, 2010
- The return on a security is composed of two parts -- the change in the market price of the security and the value of any periodic income payments made by the security. While investors often focus on the change in price, the effect of income payments can be significant. For stocks, the periodic payment is dividends, and for bonds, it is interest.
- The Benefits of Diversification
- MarketView Chart of the Week, posted August 20, 2010
- It's good to go back to basics and remember the benefits of holding a diversified portfolio. We often hear that stocks outperform bonds in the long-run, so why hold anything else? The answer is simple. While stocks may outperform in the long-run, they may not and short-term returns can fluctuate significantly. The fluctuation in returns is known as volatility. By adding other asset classes whose returns generally don't move in lock step, the potential return for the portfolio can be maintained while reducing the expected portfolio volatility. The hope is that with a smoother ride, we will be more disciplined to follow our long-term investment strategy even when short-term results get rough. The strategy is sound, but because it deals with an unknown future, it does not always work.
- Investor vs. Average Returns Morningstar Mid-Cap Value Category Performance (as of 6/30/10)
- MarketView Chart of the Week, posted August 13, 2010
- Over the 1-, 3-, 5-, and 10-year periods shown, investor returns trailed the average return for Morningstar mid-cap value funds since investors tend to invest too late (buying high) or leave too soon (selling low).
- S&P/Case-Shiller U.S. Home Price Index
- MarketView Chart of the Week, posted August 06, 2010
- The S&P/Case-Shiller Home Price Indexes provide some of the primary measures of U.S. residential real estate prices. The index family includes 23 indexes – 20 metropolitan statistical areas and three composite indexes (National; 10-City and 20-City). This chart depicts the Non-Seasonally Adjusted National composite index from 1987 through the 1st quarter of 2010.
- Fixed Income Sector Performance (as of 6/30/10)
- MarketView Chart of the Week, posted July 30, 2010
- Returns for individual sectors within the fixed income market can vary, sometimes widely from each other and when compared to the fixed income market as a whole. A sector may outperform over an extended period and then underperform in subsequent periods. The chart above illustrates the performance of eleven fixed income sectors for the twelve months ended June 30, 2009 and the twelve months ended June 30, 2010.
- Top Ten Countries in the MSCI EAFE Index (as of 6/30/10)
- MarketView Chart of the Week, posted July 23, 2010
- The Morgan Stanley Capital International ("MSCI") Europe, Australasia, and Far East Index ("EAFE") is a benchmark commonly used to measure non-U.S. developed country stock market performance. The bar chart above shows the net performance in U.S. dollars of the top 10 countries by weighting in the index as of June 30, 2010, with the country with the highest weight (Japan) listed first, and the country with the lowest weight (Netherlands) listed last. The net return of the MSCI Emerging Markets Index is also included. This index measures the equity stock market performance of several emerging market countries, which are not included in the MSCI EAFE Index.
- S&P 500 Index Sector Performance (as of 6/30/10)
- MarketView Chart of the Week, posted July 16, 2010
- Similar to the stock market as a whole, returns for individual sectors of the stock market may go up and down. A sector may outperform over an extended period and then underperform in subsequent periods. The chart above compares the performance of the S&P 500 Index ("S&P 500") to its ten underlying sectors for the twelve months ended June 30, 2009 and June 30, 2010. The S&P 500 is an index consisting of 500 companies representing larger capitalization stocks traded in the U.S.
- Capital Markets Review (As of 6/30/2010)
- MarketView Chart of the Week, posted July 9, 2010
- Capital markets returns were generally negative during the second quarter of 2010, but generally positive for the one-year, five-year, and ten-year periods ended June 30, 2010. Results for the one-year period were especially strong, with each asset class posting positive returns. Emerging Market stocks, as represented by the MSCI EM Index, posted the highest return during the 12-month period ended June 30 (23.15%)
- Large-Cap vs. Small-Cap 1-Year Rolling Return Difference
- MarketView Chart of the Week, posted July 2, 2010
- The chart above shows that small-capitalization ("small-cap"), as represented by the Russell 2000 Index, and large-capitalization ("large-cap"), as represented by the Russell 1000 Index, stocks may post dramatically different returns from one year to the next. The data points above the 0% mark represent the 12-month rolling periods during which large-cap stocks have outperformed small-cap stocks, while the data points below the 0% mark show the 12-month rolling periods in which large-cap stocks have underperformed small-cap stocks.
- Currency Effect on Year to Date International Returns (as of 5/31/2010)
- MarketView Chart of the Week, posted June 25, 2010
- International investing has many risks including foreign currency risk. When investing in foreign securities, denominated in foreign currencies, investors may experience gains or losses based on changes in the exchange rate between foreign currencies and the U.S. Dollar. A weaker U.S. Dollar, relative to local currencies, results in higher returns when converted to U.S. Dollars. In other words, the foreign currency earnings can buy more U.S. Dollars; hence a higher return for U.S. based investors. However, a stronger U.S. dollar has the opposite effect of lower returns for U.S. based investors.
- Forward P/E Ratio for the S&P 500 Index
- MarketView Chart of the Week, posted June 18, 2010
- The above chart depicts the Price/Earnings ratio ("P/E ratio") for the S&P 500 Index calculated with "forward" earnings. This chart differs from the chart two weeks ago which used trailing actual earnings to calculate the P/E ratio. That previous chart is a good way to look at the overall valuation of the stock market, while this chart looks at stock prices relative to "forward" or future estimated earnings expectations. In essence, stock prices usually reflect expectations of future earnings, and when market participants believe corporate earnings are going to rise, typically stock prices follow. Unfortunately, the reverse is also typically true.
- The Conference Board Leading Indicators
- MarketView Chart of the Week, posted June 11, 2010
- The Conference Board Leading Indicators Index is a weighted average of ten key economic indicators designed to help anticipate short-term economic conditions. The indicator is expected to turn up before a recovery and turn down before an economic slump. The indicators comprising the index include: 10 year treasury/fed funds spread, M2 money supply, average manufacturing work week, stock prices of the S&P 500 Index, average weekly initial claims for unemployment, supplier delivery performance, housing permits, consumer expectations, and manufacturer new orders. As a general guideline, three consecutive months of decline in the index is typically considered to be a sign of a pending economic downturn.
- Historical Cost of $1 of S&P 500 Index Earnings
- MarketView Chart of the Week, posted June 04, 2010
- The Price/Earnings Ratio (“P/E ratio”) of a stock or a group of stocks is as straightforward as it sounds: it is equal to the price per share divided by the earnings per share. Over time, this ratio will fluctuate. The chart above shows how the P/E ratio for the S&P 500 Index ("S&P 500"), consisting of 500 companies representing larger capitalization stocks traded in the U.S., has changed over the last twenty years. The P/E ratio used in the chart above uses 12-month trailing earnings as the "E" in the ratio.
- U.S. Home Sales
- MarketView Chart of the Week, posted May 28, 2010
- The U.S. Census Bureau and the National Association of Realtors recently released figures on new and existing home sales. These figures illustrate the possible impact of the U.S. Government's home buyer credit programs. The sales of existing homes are up 22.8% from April 2009 and sales of new homes are up 47.8% for the same period.
- Time Is On Your Side
- MarketView Chart of the Week, posted May 21, 2010
- The earlier you start to save, the less it will cost you to become a millionaire. In other words, the sooner you begin to prepare for retirement, the less you will have to contribute out-of-pocket to reach your end goal.
- Sell in May, And Go Away?
- MarketView Chart of the Week, posted May 14, 2010
- The old saw, "Sell in May and Go Away" refers to the long term differential between the returns in the stock market in the May-October period and the November-April period. The difference in the two periods continues to be quite striking as the chart above reflects using the S&P 500 Index to represent the stock market. If one invested $1,000 in the stock market at the close on October 31, 1971, and then sold on April 30, 1972 and repeated the process each year on the same dates, the balance would have grown to $14,800 by April 30, 2009.
- Gross Domestic Product (GDP)
- MarketView Chart of the Week, posted May 07, 2010
- A country’s gross domestic product (GDP) is one measure of the size of its economy. GDP is generally defined as the market value of all final goods and services produced within a country in a given period of time. Many economists follow movements in GDP growth rates to assess how quickly or slowly an economy is growing or contracting. GDP is measured with inflation (nominal) and without inflation (real).
- Fixed Income Sector Performance (as of 3/31/10)
- MarketView Chart of the Week, posted April 30, 2010
- Similar to the fixed income market as a whole, returns for individual sectors may go up or down. A sector may outperform over an extended period and then underperform in subsequent periods. The chart above illustrates the performance of eleven fixed income sectors for the twelve months ended March 31, 2009 and the twelve months ended March 31, 2010.
- Top Ten Countries in the MSCI EAFE Index
- MarketView Chart of the Week, posted April 16, 2010
- The Morgan Stanley Capital International ("MSCI") Europe, Australasia, and Far East Index ("EAFE") is a benchmark commonly used to measure non-U.S. developed country stock market performance. The bar chart above shows the net performance in U.S. dollars of the top 10 countries by weighting in the index as of March 31, 2010, with the country with the highest weight (Japan) listed first, and the country with the lowest weight (Netherlands) listed last. The net return of the MSCI Emerging Markets Index is also included. This index measures the equity stock market performance of several emerging market countries, which are not included in the MSCI EAFE Index.
- S&P 500 Index Sector Performance (as of 3/31/10)
- MarketView Chart of the Week, posted April 16, 2010
- Similar to the stock market as a whole, returns for individual sectors of the stock market may go up and down. A sector may outperform over an extended period and then underperform in subsequent periods. The chart above compares the performance of the S&P 500 Index ("S&P 500") to its ten underlying sectors for the twelve months ended March 31, 2009 and March 31, 2010. The S&P 500 is an index consisting of 500 companies representing larger capitalization stocks traded in the U.S.
- Capital Markets Review (As of 3/31/2010)
- MarketView Chart of the Week, posted April 09, 2010
- Capital markets returns were positive across the board for the quarter, year, and five years ended March 31, 2010. Only large-cap U.S. stocks, as measured by the S&P 500, posted negative returns for the ten-year period (-0.65%). Returns for the one year ended March 31, 2010 were unusually high as compared to historical standards. Each class of equity depicted above returned at least 49% during that period.
- The Cost of Losing the 10 Best Days of the S&P 500 Index
- MarketView Chart of the Week, posted April 01, 2010
- Investors would be wise to consider the old adage, “Patience is a virtue,” when managing their portfolios. Stock prices may shift up and down quickly and dramatically at times, particularly during periods of elevated volatility like that of the last two years. However, making investment decisions based on short-term performance or attempting to time the market could lead to negative consequences. As the chart above shows, an investor who missed the ten best days of the market, as measured by S&P 500 Index price return, would have an ending balance less than half an investor who remained fully invested at all times. If $10,000 were invested in the S&P 500 Index in January 1, 1980, it would be worth $110,937 on March 30, 2010. If that same investment missed the ten best-performing days out of the entire time period sample of 7,632 days, it would be worth only $53,532.
- Market Volatility Index
- MarketView Chart of the Week, posted March 26, 2010
- Volatility in the stock market, as measured by the Chicago Board of Options Exchange VIX Index, decreased substantially over the past twelve months. For Tuesday, March 23, 2010, the VIX Index closing price stood at a more historically normal level of 16.35, compared to a ten-year high of 80.86 on November 20, 2008. The VIX Index is a commonly used measure of the market's expectation of volatility and risk over the next 30-day period. A high VIX Index level is generally associated with a period of increased volatility and uncertainty in the market, while a lower level corresponds to less volatility and stress in the market.
- Reduction of Risk Over Time
- MarketView Chart of the Week, posted March 19, 2010
- The above chart shows the range of equity returns, as represented by the S&P 500 Index, for rolling 12 month periods since 1926. An equity investment matching the performance of the S&P 500 Index for a one-year period would have produced results ranging from a 163% gain (July 1932 to June 1933) to a 68% loss (July 1931 to June 1932). However, the range of annualized returns is narrower for longer rolling time periods. For example, holding the same investment for twenty years returned as much as 18.25% per year (April 1981 to March 2000) and never less than 1.89% (September 1930 to August 1949).
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