Why Are Most Stocks Not Doing Well?

There is a real misconception right now among investors. Many see the Dow Jones Industrial Average (Dow) and the S&P 500 (SPX) near all-time highs, yet their accounts don’t seem to be doing as well, and they are wondering why. Perhaps this sounds familiar?

This is a phenomenon known as “divergence”, and it is not all that uncommon. However, it is not widely known of by investors so it can cause confusion.

A divergence occurs when the major indexes act differently than the majority of other indexes.

For most of the year, small and mid-cap stocks were out performing the Dow, and many investment accounts were doing better than what people expected because a properly managed account is properly diversified in many different in many sectors as well as all six non-correlating  asset classes.

That just flip-flopped. Now the big stock indexes are doing better than most stocks, as well as bonds, real estate and commodities such as gold, leaving investors to wonder why their portfolios are lagging…when they really are not.

Let’s look at the most recent performance. September was positive, but the gains were very narrow and the gains weren’t widespread. The SPX rose 0.4% in September. Although relatively modest, it made repeated records and had its sixth straight monthly gain. The Dow rose 1.9% over the month.

In contrast, most other stocks have struggled of late. The Russell 2000, a broad-based index of 2000 stocks, and the S&P Small Cap 600 got hammered, sinking 2.5% and 3.3% respectively in september.

I bring this to your attention for 2 reasons.

  1. Your personal accounts are probably doing better than you think
  2. The current lack of broad participation could be a warning sign

Either, the other indexes catch up and start making new highs, or the narrow participation means the end of the rally or a correction will soon be upon us.

For aggressive younger investors, the action shouldn’t bother you all that much because you are dollar cost averaging, constantly investing more so you are accumulating at low prices. The economy looks strong and the market should be “relatively” resilient.

For retirement investors, those who are retired or in that retirement red-zone, it’s a different story. You don’t have the time to make back big losses. For most of us in this stage of life, big losses hurt more than big gains help.

Obviously we all need to stay invested as money in the bank is practically suicide. In this dangerous environment, it has never been more important to take the time to do the “planning”. Create a Retirement Master plan so you tell your money exactly what to do, so you invest properly to get the very best returns, but with the least risk possible. It’s what we do for our clients every day.

If you would like to learn more about our disciplined investment and planning approach that manages risk and delivers returns, while being conscious of forward-looking tax-strategies and retirement income opportunities, contact us today for a free no obligation consultation.


Cheers -Keith Springer



P.S. “Invest for need, not for greed!™”    


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