The investment markets continued to make gains in Q2. Four of the five asset classes we follow were higher in Q2. In Q2 the Dow Jones index hit 40,000 for the first time. It’s also noteworthy that the Dow is not heavily weighted by the “magnificent seven” and technology stocks.
The media headlines focused on the events in the political arena. Many people believe that political outcomes influence financial markets. While this may be true in the very short term, over the longer horizon, their impact (positive and negative) evens out.
As a student of financial markets, I observe that media seems to pay more attention to market declines than it does to the increases. Certainly, declines elicit a fearful response and fear sells newspapers. Yet the history of about 100 years shows that though the markets decline from time to time, these declines occurred in about 26% of the years. This also means that the markets had up-years 74% of the time. I believe that successful investors keep their eyes (and behavior) focused on the 74% frequency.
The mix of leaders and laggards changes each quarter supporting our thesis that diversified portfolios are an attractive investment strategy. For high-net-worth investors, we believe that equities are the better choice for increasing their wealth after inflation and taxes.
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