Investing in large-cap stocks is an essential part of a well-diversified investment strategy. The companies in this asset class are often well-established and have a track record of stability and consistent performance.
When it comes to Artificial Intelligence, there is much speculative investing going on, which we don’t recommend. That doesn’t mean we don’t invest in AI opportunities that benefit investors today.
When new clients first come to our firm, we often find their portfolios packed with large-cap stocks, companies that are valued at more than $10 billion. These are the companies that comprise the S&P 500. Although large-cap stock is a good place to start, once you begin to build a portfolio, it is essential to include small-cap stocks with $300 million to $2 billion in market cap. These companies are much smaller, so they have more significant potential to deliver outsized returns than larger companies.
A banking crisis, the debt ceiling, recessionary fears, and increasing global tensions are reasons investors are fearful. Yet you may have noticed that the US stock market has been acting kind of strange lately. So, let’s talk about what is happening with the US stock market – specifically large-cap stocks – many people think of the S&P 500.
A brief review of the economy and some asset classes performance for Q12023.
Every investment decision has consequences; only the future will determine if it is a good decision. Due to the uncertainty of the markets and while many try to forecast the future, they have yet to achieve success consistently or reliably.
The past year was challenging with high interest rates and inflation, recession fears and a war which set the stage for nervous investors and downward markets. While all the major equity and fixed income asset classes were down, alternative “enhancer” asset classes had mixed results, supporting a well-diversified portfolio. In addition, a tilt towards quality and value further protected portfolios from experiencing the full decline of the markets.
nvestors are shocked that the so-called 60/40 portfolio failed to provide protection from the bear market in stocks this year. Many thought stock and bond prices always move in opposite directions, which was the foundation of their diversification strategy. Today the average 60/40 portfolio is down 18.63% compared with an 18.6% decline in the S&P 500, so this belief was wrong. The combination of rising interest rates and the threat of a recession has hammered both stock and bonds.
Investors are shocked that the so-called 60/40 portfolio failed to provide protection from the bear market in stocks this year. Many thought stock and bond prices always move in opposite directions, which was the foundation of their diversification strategy.
