Hi folks. Dave Piatkowski here with Dickinson Investments. Just some thoughts from us here regarding the recent presidential election and how it affects your portfolios.
At a recent Thanksgiving gathering with friends and family – went to multiple gatherings and in several situations had both family members and friends ask me privately and kind of a group setting why their 401(k) at work or their IRA wasn’t going up because the market is at an all-time high. Things are going great since the presidential election. Subsequent to that, we had a couple of conversations with clients with that. You know what? This is a good time just to let people understand the difference between the Dow and the market.
So what has happened since the presidential election is the Dow Jones Industrial Average, which is basically 30 manufacturing and industrial stocks, has gone up not every day but most days and it’s at an all-time high since the election.
The problem is when you’re driving to work and you’re listening to AM radio or you read the paper or you watch the nightly news or even pull it up on the internet, most of the media talks about that as if it’s the market, it’s the only thing you look at, and the reality is most people’s investment portfolios, whether it’s your 401(k) at work or your IRA here or wherever, are well-rounded portfolios that have a variety of components to it and almost nobody has invested in the Dow. It’s just those 30 stocks.
So to give you some background since the election, the fixed income or the bonds which many people have and the older you get, more people tend to have more of that in their portfolio, due to a slight rise in interest rates and the fear of some coming interest rate rises, the fixed income or bond portfolios have actually been down since the election.
Simultaneous to that, due to some fear about how the Trump administration may affect international trade and some of the trade partners we have and some of those relationships, international stocks and emerging markets, which are components of people’s portfolio, have also been down and along with that, the NASDAQ, which is a different index that has a lot of technology stocks and things in it, hasn’t been up the way the Dow Industrial Average has during that time frame.
So when you add these all together and add in the fact that another component, the small cap and mid-caps haven’t performed the way the Dow has, many people just got the misconception that they’re going to log into their account online or get their November 30th statement if they get a monthly statement and it’s just going to be skyrocketing in value. And because most people’s portfolios are somewhat protecting the downside and also defensive to a measure, you’re not going to just skyrocket with the market or the Dow in this case as the perception is for most people.
But you’re also not going to – when the Dow goes down X percent, you wouldn’t be in lockstep with that either, unless you were invested in just the Dow. So just to reiterate, there’s a big reason why most people’s accounts haven’t gone up or down with the Dow in lockstep because almost nobody is invested in the Dow.
It’s just a bellwether that the media tends to use to let you know how the markets are doing and in many cases, the Dow might be going up in conjunction with small cap, mid cap, NASDAQ and international. That happens sometimes. But in this scenario, it didn’t happen and so many people might have – just not have the same kind of returns that the Dow has had in this small window of time. But we’re always looking big picture long term and that’s what we like to focus on.
[Financial Planning and Investment Management Services offered through Dickinson Investment Advisors, Registered Investment Advisor. Statistics and market information provided by Litman Gregory Advisor Intelligence.]