Week 45 - $856.74
The S&P 500 broke new record highs in the midst of an pandemic-driven economic recession, although whether this trend will continue remains in question.
Total Report (Since October 11th, 2019)
Positive Performing Sectors
1. Materials (+29.16%)
2. Consumer Discretionary (+27.20%)
3. Industrials (+20.32%)
4. Consumer Staples (+19.00%)
5. Healthcare (+13.47%)
6. Financials (+1.42%)
Negative Performing Sectors
7. Utilities (-11.53%)
8. Communication Services (-12.75%)
9. Information Technology (-12.91%)
10. Real Estate (-18.65%)
11. Energy (-21.96%)
1. Materials (+29.16%)
2. Consumer Discretionary (+27.20%)
3. Industrials (+20.32%)
4. Consumer Staples (+19.00%)
5. Healthcare (+13.47%)
6. Financials (+1.42%)
Negative Performing Sectors
7. Utilities (-11.53%)
8. Communication Services (-12.75%)
9. Information Technology (-12.91%)
10. Real Estate (-18.65%)
11. Energy (-21.96%)
Weekly Report (August 21st, 2020)
Positive Performing Sectors
1. Consumer Discretionary (+2.05%)
Negative Performing Sectors
2. Consumer Staples (-0.42%)
3. Information Technology (-0.63%)
4. Healthcare (-0.73%)
5. Industrials (-1.03%)
6. Communication Services (-1.05%)
7. Materials (-1.13%)
8. Real Estate (-1.53%)
9. Utilities (-1.84%)
10. Financials (-3.46%)
11. Energy (-4.62%)
1. Consumer Discretionary (+2.05%)
Negative Performing Sectors
2. Consumer Staples (-0.42%)
3. Information Technology (-0.63%)
4. Healthcare (-0.73%)
5. Industrials (-1.03%)
6. Communication Services (-1.05%)
7. Materials (-1.13%)
8. Real Estate (-1.53%)
9. Utilities (-1.84%)
10. Financials (-3.46%)
11. Energy (-4.62%)
GICS Sector Performance Ratio - Balanced: From 8:3 (72.73%) to 1:10 (9.09%)
Review
The S&P 500 reached all-time highs as stock valuations climb further up as investors look forward towards future economic growth in the midst of a recession. Yet strangely enough, the stock market rally had also marked the shortest bear market in history at only 33 days. Double-digit unemployment and growing numbers of COVID-19 infections still remain, but the improving conditions outlined by company reports suggest that the market shock caused by the shutdowns had significantly worn off since the stock markets hit bottom in March.
Will this upward trend likely continue? For the short term, yes. However the long term must eventually match with the true condition of the economy as it stands. Stock markets may be forward-looking, but those predictions must eventually come to bear with reality at some point. Should the economy fail to sustain the economic recovery into next year, it can be expected that another drop in valuation would occur. This is evident by how income-generating stocks such as the Dividend Aristocrats are under-performing compared to its peers in the S&P 500 in terms of capital gains. Dividend-based stocks tend to follow the economy more closely than growth-based stocks due to the inherent nature in which their gains are respectively made. Growth stocks do not have to rely on true revenue value to generate gains from its current valuations. Dividend stocks must.
In such case, how is it possible that the Dividend Aristocrats outperform the S&P 500 in the long term? Simply put, Dividend Aristocrats rely on the undervaluation of stocks during bear markets. Because gains are generated from dividends per share as opposed to capital gains from selling shares, acquiring more shares allow Dividend Aristocrats to build momentum on their own success. Adding to the fact that these gains are always realized means profits are always locked in for the shareholder of those dividend stocks, keeping them safe from the price volatility of the stock markets. Even if there were to be another significant dip in valuations in the near future, reliable dividend stocks kept long-term should eventually outperform most growth stocks in the S&P 500, regardless of market conditions.
Will this upward trend likely continue? For the short term, yes. However the long term must eventually match with the true condition of the economy as it stands. Stock markets may be forward-looking, but those predictions must eventually come to bear with reality at some point. Should the economy fail to sustain the economic recovery into next year, it can be expected that another drop in valuation would occur. This is evident by how income-generating stocks such as the Dividend Aristocrats are under-performing compared to its peers in the S&P 500 in terms of capital gains. Dividend-based stocks tend to follow the economy more closely than growth-based stocks due to the inherent nature in which their gains are respectively made. Growth stocks do not have to rely on true revenue value to generate gains from its current valuations. Dividend stocks must.
In such case, how is it possible that the Dividend Aristocrats outperform the S&P 500 in the long term? Simply put, Dividend Aristocrats rely on the undervaluation of stocks during bear markets. Because gains are generated from dividends per share as opposed to capital gains from selling shares, acquiring more shares allow Dividend Aristocrats to build momentum on their own success. Adding to the fact that these gains are always realized means profits are always locked in for the shareholder of those dividend stocks, keeping them safe from the price volatility of the stock markets. Even if there were to be another significant dip in valuations in the near future, reliable dividend stocks kept long-term should eventually outperform most growth stocks in the S&P 500, regardless of market conditions.
Last Week's Update (August 14th, 2020)
M1 Finance Platform Referral Link: https://m1.finance/UIl_N9XNA_CO
M1 Finance Dividend Aristocrats 2020 Pie: https://m1.finance/quB1JH2k6
M1 Finance Platform Referral Link: https://m1.finance/UIl_N9XNA_CO
M1 Finance Dividend Aristocrats 2020 Pie: https://m1.finance/quB1JH2k6
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