Richard C. Young & Co., Ltd. is a Naples, FL and Newport, RI based financial advisory firm. We have been ranked by Barron’s as one of the top independent financial advisors in the nation for the last eight consecutive years. We manage portfolios for individuals, families, and small businesses throughout the United States.
One of gold’s basic roles in an investment portfolio is to hedge against inflation risk. Inflation is a destructive force that can decimate a lifetime’s worth of savings. Over the last 30 years, inflation has eroded the purchasing power of the dollar by nearly 56%. And this has been a period of modest inflation. When factoring in a period of high inflation, the math looks much worse. Since the 1970s, the purchasing power of the dollar is down an astonishing 84%.
Investing in stocks for the long run has become the accepted wisdom of many investors over recent decades. The media, pundits, and promoters, as well as many brokers and advisors, recommend stocks as the most suitable asset class for investing over the long run. Stocks win over the long run, cash is trash, and bonds are boring, investors are told. The bull markets of the 80s and 90s surely greased the wheels of the “stocks for the long run” band wagon. Jeremy Siegel, professor of finance at Wharton School of Business, even wrote a book on the subject.
Small company U.S. stocks have officially entered bear-market territory. The small-company Russell 2000 Index has fallen 26% from its bull-market high. And as of early February, the MSCI All-Country World Index—the gold standard of global stock market indices—crossed into bear country. Emerging market stocks have long been in a bear market, and foreign-developed world equities arrived in bear territory in January.
For many investors, 2015 was a challenging year. The S&P 500 managed to eke out a positive total return, but it was a handful of stocks (many of the more speculative variety) that carried the market. The average U.S. stock was down more than 4% last year. Take away Amazon, Netflix, Google, and Facebook and the S&P 500 would have finished in the red.
Despite modest gains in the U.S. stock market this year, most U.S. stocks are down year-to-date. Outside of a handful of names, it has been a challenging year for equities and most especially for global equities. In the chart below we compare the performance of big U.S. stocks to small U.S. stocks, foreign developed market stocks, and emerging market stocks. The only group that has managed to stay out of the red YTD is big U.S. stocks. How have the big-cap U.S. stocks managed to stay in positive territory when most companies in these indices are down on the year? Fewer and fewer big stocks are responsible for the gains. Analysts call it a lack of breadth. A recent USA Today piece explains.
NAPLES, FL
5150 Tamiami Trail North, Suite 400
Naples, FL 34103
Phone: (888) 456-5444 Fax: (239) 213-0770
NEWPORT, RI
98 William Street
Newport, RI 02840
Phone: (800) 843-7273 Fax: (401) 849-0002
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