U.S. equities moved lower this week as indicated by the S&P 500 which was down -5.67% on the week. In the U.S., smaller-sized companies underperformed their larger-sized counterparts, as the Russell 2000 index decreased by -8.07% on the week. International stocks as measured by the MSCI EAFE were negative on the week, down -2.08%, outperforming domestic stocks. Emerging market stocks were down on the week with the MSCI EM decreasing -1.04%. U.S. investment-grade bonds were positive last week with the Bloomberg Barclays U.S. Aggregate Bond index up +0.05%.
STOCK CORRECTION - After closing at an all-time high of 16,057 on 11/19/2021, the NASDAQ Composite index has fallen 14.2% (total return) over the next 2 months to close at 13,769 on Friday 1/21/2022. The NASDAQ Composite is an unmanaged index of securities traded on the NASDAQ system (source: NASDAQ).
UP/DOWN - The S&P 500 index has been up 40 of the last 50 years, i.e., 1972-2021, gaining an average of +11.1% per year (total return). The stock index has produced an average annual gain of +18.8% (total return) during the 40 “up” years while losing an average of 14.8% per year (total return) during the 10 “down” years. The S&P 500 is down 7.7% YTD (total return) through Friday 1/21/2022. The S&P 500 consists of 500 stocks chosen for market size, liquidity, and industry group representation. It is a market value weighted index with each stock's weight in the index proportionate to its market value (source: BTN Research).
WHICH SHOULD YOU FOLLOW? - As of 12/31/2021, the S&P 500 represents 79% of the stock market capitalization of the entire US stock market, i.e., $42.4 trillion of $53.4 trillion. As of 12/31/2021, the 30 stocks that make up the Dow Jones Industrial Average represents just 22% of the stock market capitalization of the entire US stock market, i.e., $12.0 trillion of $53.4 trillion (source: BTN Research).
A MILLION LESS - In the fall of 2019 (pre-pandemic), 15.47 million undergraduates were enrolled in college. In the fall of 2021, 14.44 million undergraduates were enrolled (source: Nat’l Student Clearinghouse Research Ctr.).
Index performance does not reflect the deduction of any fees and expenses, and if deducted, performance would be reduced. Indexes are unmanaged and investors are not able to invest directly into any index. Past performance cannot guarantee future results.
Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect again loss. In general, the bond market is volatile; bond prices rise when interest rates fall and vice versa. This effect is usually pronounced for longer term securities. Any fixed-income security sold or redeemed prior to maturity may be subject to a substantial gain or loss. Vehicles that invest in lower-rated debt securities (commonly referred to as junk bonds or high-yield bonds) involve additional risks because of the lower credit quality of the securities in the portfolio. International investing involves special risks not present with U.S. investments due to factors such as increased volatility, currency fluctuation, and differences in auditing and other financial standards. These risks can be accentuated in emerging markets.
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