The Summer Doldrums!

Over the last several months you have read and listened to me suggest the top 6 Big-Tech names were pushing the valuations of Indexes like the S&P 500 higher and that under those big-name movers, not a lot was happening, up or down!

This is key; the S&P 500 is what we call a “Market Capitalization-Weighted” Index.  In English this simply means if your company is gigantic like that fruity company, it has a very large impact on the direction of the index, both up and down. 

There is a way to view how the market valuations are moving without this huge, weighted impact.  It is to “equally weight” all the companies in the index.  It is like putting on a pair of x-ray glasses to see right through the fear to what is really going on.

The first chart below is the price movement of the Invesco “Equal Weight S&P 500 Index”.  Observe below via the red arrows, that the current valuations are about exactly where they were at the beginning of March 2024.

Yes, I know, you need to have 901 samples to make a perfect bell curve so, this next price chart is for the “Invesco Russell 1000 Equally Weighted Index”.  Observe in this chart representing the largest 1,000 companies in America, that today’s valuations are about the same as December 2023.

Let your eyes gaze over both price charts and try to envision a box around my horizontal purple arrow.  As I have written here many times, it is rare, I mean very rare, but I don’t know the statistics, for prices to drop down out of a multi month price box.  Instead, this is referred to as “base camp” and it is more likely where prices going forward trend to the upside.

During the summer doldrums, volumes of transactions dry up.  This causes volatility, both up and down.  Don’t let this scare you.  It is normal and based on the two charts above, and last month’s issue of The Seven Signs of a Changing Economy™ (read the June issue here), this should be viewed as an opportunity to continue building your bigger financial future!!!

At the WSG, we are well allocated for this and have our well thought out Investment Selection Matrix™, investment menu working in our collective TWSG family’s asset allocations!

I’m interested in your thoughts, comments, and observations.  Feel welcome to call, email, or stop by the office and say Hi.

Respectfully,

James O. Lunney, CFP®

CERTIFIED FINANCIAL PLANNER™ Professional  

Securities and advisory services offered through LPL Financial, a registered investment advisor. Member FINRA/SIPC. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.

All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested in directly. The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful. Stock investing includes risks, including fluctuating prices and loss of principal.

Asset allocation does not ensure a profit or protect against a loss.  Value investments can perform differently from the market as a whole.  They can remain undervalued by the market for long periods of time.