When viewed at the individual stock level, 2017 has been a much more mixed picture than the “market” shows
The more I look at where investment returns have come from during 2017, the more I am reminded of 1999. That year, the “market” did well, but most of its return came from a limited number of technology stocks, which had come to dominate the market. Those stocks were purely for aggressive growth investors, since they paid little or no dividend yield, and their stock prices were based in large part on the hope that their earnings could grow into their very high valuations. 1999 is a memorable year for anyone who was involved in financial markets at the time, as what followed was the first and only instance in modern US stock market history in which the broad market fell for 3 consecutive years.
The chart above summarizes where this year’s returns have come from within the S&P 500. And while the situation is not as skewed as it was in 1999, it does tell us that this has hardly been an environment in which the majority of stocks and investment styles have participated. Large tech stocks and some large companies in other sectors have roared this year, but for most stocks, it has been a case of 1 step forward, 1 step back. I highlighted in yellow above the key takeaways from this chart, to make it easier for you to focus on what is going on in all that data. What I found is this: