Stock Markets Rise, Yet Opportunities Remain
Posted on March 25, 2021
Despite the unprecedented volatility we experienced in 2020, the financial markets proved once again to be surprisingly resilient. With the broader equity indexes experiencing double-digit gains, investors may be asking if now is the time to invest new funds in stocks, considering the recent excellent returns. We think it is important to dig a little deeper into the individual investment categories to find where the relative values are.
If you take a somewhat longer view of investment performance, it is clear that growth-oriented stocks (defined as having higher earnings growth rates than the broader market) have been the biggest winners. According to investment research firm Morningstar, over the last three years, growth stocks (both small and large cap) were up more than 20% per year. Over that same period, value stocks (defined as having price-to-earnings ratios lower than the broader market) have averaged only +6%. This massive underperformance presents an opportunity to take a look at individual names that fall into this category.
In addition to looking at investment style, it is also helpful to look at performance of individual sectors to find interesting investment ideas. For example, the 5-year average return of the Exchange Traded Fund that tracks consumer discretionary stocks is up more than 18%, while the energy sector is actually down 5% per year during that same period. Other 5-year laggards include financials (+6%), consumer staples (+7%), and utilities (+8%). It is also notable that many of these underperforming sectors will benefit greatly by a broader reopening of the post-pandemic economy. Long-term investors should feel confident that a custom-tailored portfolio can be quite beneficial to those willing to be patient.
Our Portfolio Management and Wealth Services team members welcome your call to discuss how we can help maximize opportunities for your portfolio. www.sancaptrustco.com
Executive Vice President, Senior Portfolio Manager
The Sanibel Captiva Trust Company is an independent trust company with $3 billion in assets under management that provides family office and wealth management services, including investment management, trust administration and financial counsel to high-net-worth individuals, families, businesses, foundations and endowments. Founded in 2001 as a state-chartered independent trust company, the firm is focused on wealth management services that are absolute-return oriented and performance driven. Each portfolio is separately managed and customized specifically to the client’s yield and cash-flow requirements. The Naples Trust Company and The Tampa Bay Trust Company are divisions of The Sanibel Captiva Trust Company. Offices in Sanibel-Captiva, Naples, Marco Island, Tampa, Belleair Bluffs-Clearwater and Tarpon Springs. www.sancaptrustco.com
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