News & Views

Portfolio Returns and the "Trump Bump" - Why it was not as good as you expected.

If you have been paying attention to the daily reporting of the "Trump Bump" in the stock market, there is a good chance you have some questions about your recent quarterly investment report. While the excitement around DOW 20,000 it is not "fake news", it is very narrow news compared to what happened to investments globally in the fourth quarter of 2016.

Looking at the market summary below, you can see that the US Stock Market was the only gainer for the quarter. Most investors own portfolios with asset allocations containing investments from each of these areas. Feel better? Probably not, but at the very least you should have a better understanding of your personal return.


Every quarter J.P Morgan Asset Management produces it's Guide to the Markets. Below is a look at the differing asset class returns over time. As you can see, a diversified portfolio always falls somewhere in the middle of the range of annual returns, never appearing at the top or bottom of the chart. Obviously, if an investor held just one of the asset classes as their total portfolio they would have a more varied experience of the ups and downs of investing.


The benefits of holding a diversified portfolio are not as clear when markets are up, but what about when markets are down? Below shows how the J.P. Morgan Asset Allocation Portfolio Benchmark has performed relative to the DJIA in selected down markets. During these times investors tend to see the value of diversification.


Here is the comparison of returns for the time frame in question, which explains why investors who held a diversified portfolio (and I would argue that all should) did not experience the so called "Trump Bump"


The bottom line is that no one knows what will happen next regarding the stock market, and holding a diversified portfolio of low cost index funds, re-balanced at regular intervals, and monitored by a qualified adviser is the best course to take for long term investors.

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