Transcript:
Tom Vaughan:
Hello, everybody, welcome to Monday. The S&P 500 was up .35% today: Hit an all time record high. And I want to share with you some of the research that I worked on this weekend that I think is very fascinating. If you look back to last year, basically you could find certain areas of the market that would start to trend, and they would go for three to nine months. So, clean energy, and innovative technology, and genomics; and it was just really interesting. And then there were other parts of the market because of the pandemic, they were completely closed down, so even more money was going into those trending areas. Now, the markets kind of broadening out. A lot more opportunities and what have you, and so we’ve been slowly but surely broadening out the portfolio.
But let me show you just kind of an extreme example of what’s happening here. So I use an ETF called VTI, and it’s the Vanguard Total Stock Market index. And that’s my total index that I use for the stock portion; I try to compete against that constantly. So you can go to Vanguard and buy this, it has almost all of the stocks in the US on it. And then there’s the Total Bond Market index, which is a very, very broad bond market from Vanguard called BND that I use for the bond market portion. But let me show you the stock portion.
One of the things I prize is consistency. So let me show you how this works. So this is a spreadsheet here, it goes down 2443 rows, and that’s the number of ETFs that I downloaded here, that I’m looking through. And what I want to do is I want to find, let’s say all of the ETFs, that have done better than VTI in the 12 month period, which is this timeframe, and I’ve color coded those green. And let’s say I prize consistency, so I also want to find those that are doing better in the last nine months, the last six months, the last three months, and last but not least, the last one month. And so what you see here is now we just took 2443 ETFs: Only eight of them have beat the VTI, the Total Stock Market index; every time period here 12, 9, 6, 3, and one month period. And if I did this last year, this was hundreds of different options to pick from.
And so that tells you something really powerful about the market. First of all, if you look back to what I was doing in 2019, for example, we had 75% in the broad market indexes and 25% in the targeted indexes. In 2020, we actually reversed that, because there was such a problem with the broad market indexes with a whole chunk of the economy, shutting down. Now that things are reopening, and starting to happen, and we’re going around. We’re still not seeing big movements out of the international yet, so this is still just so far a US issue, in terms of total rate of return. If you look at the International indexes, they’re not doing as well. That could change, though we’ll watch for that. But basically, we’ve now moved back to where we were. So I’m moving the portfolio, the models back to about 73% broad market index, and the rest are these targeted indexes.
And I think that’s kind of the way to go. looking at what’s happening right here. Maybe there’s a trend that develops here at some point in time. Maybe inflation really comes up heavy, and we have to kind of deal with that. But right now, I think that’s the place to look as these broad market indexes and reducing the number of targeted indexes, so that we can continue to see some of the gains that we’re used to.
So anyway, that’s what’s happening right now. Really, again, always fascinating marketplace. We know this reopening is something completely unusual for everybody, and I think, just sort of peeling the onion on trying to figure out, what to do next, and things look pretty good as far as I’m concerned. So I like a broad based market. If a market goes really narrow for a really long time, that’s how we got the 2000 downturn. So what we saw was a fairly narrow market last year, broadening out into something quite big, and we’re still hitting all time highs. That’s a really powerful market that I think is worth looking at. So anyway, that’s what’s happening right now. I look forward to seeing you tomorrow. Thank you.