Blog Article

June 2023 Market Update

Kristi de Grys

By Kristi de Grys, Chief Operating, Investment, and Compliance Officer
Published On 06/20/2023

With Congress passing a bi-partisan deal to avert a debt-ceiling crisis, we can turn our focus back to what has been happening in markets this year. If you have missed it, the S&P 500 index has experienced a strong rally since January. However, just looking at the index provides a misleading picture. The rally has been driven by the top five stocks in the index (Microsoft, Amazon, Apple, Alphabet, and Nvidia). Excluding those stocks the index through June 1 would be up roughly 1.5%, and if you take out Tesla and Meta which have similarly benefitted from optimism about AI, the index would be slightly underwater for the year.

Top Investment Insights

In the face of this type of rally, and coming off a decade of U.S. tech stock dominance, it is natural to question whether having a diversified portfolio still makes sense. Investment strategies that hold the top five, 10, or 20 stocks, often called top-dog strategies, have been studied for decades by dozens of investors and institutions. Those studies have never shown that a top-dog strategy will reliably deliver future outperformance compared to a diversified portfolio. That doesn’t mean a top-dog portfolio will never outperform, as we have seen it do the past six months and before that in the late 2010s. Concentrated portfolios in general have a higher possibility of delivering outsized returns, but also a much higher possibility of delivering subpar returns. When the recent experience has only been positive, it is easy to forget about the other side. Our financial planning tools allow us to look at the consequences of both good and bad periods and, like the academic studies, they show that a diversified portfolio delivers more reliable outcomes than a top-dog strategy over the long run. If you would like to learn more about how a diversified portfolio can help you achieve your financial goals, we would love to chat.

 

Disclosure: All opinions expressed in this article are for general informational purposes and constitute the judgment of the author(s) as of the date of the report. These opinions are subject to change without notice and are not intended to provide specific advice or recommendations for any individual or on any specific security. The material has been gathered from sources believed to be reliable, however Merriman cannot guarantee the accuracy or completeness of such information, and certain information presented here may have been condensed or summarized from its original source.  Merriman does not provide tax, legal or accounting advice, and nothing contained in these materials should be taken as such. To determine which investments may be appropriate for you, consult your financial advisor prior to investing. As always please remember investing involves risk and possible loss of principal capital and past performance does not guarantee future returns; please seek advice from a licensed professional.

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Kristi de Grys

By Kristi de Grys, Chief Operating, Investment, and Compliance Officer

As Chief Operating, Investment, and Compliance Officer, Kristi is responsible for the firm’s investment offerings, client service, operations, and compliance. She and her team are focused on delivering ever greater value to our clients through outstanding service, diversified investment offerings, and easy-to-use technology.

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