A Merry Christmas to all! While the run-up to Christmas was generally cheery, indeed, if I had a dollar for every predictable reference I have read to the “Santa Claus rally” I could retire today, the watchlists we follow underperformed the broader markets again.
As you will observe, the ST50 handily outperformed the IBD50, but both lists fell behind the average market move, which we define as the mean of the week’s change on the S&P500 and the Nasdaq composite. Although the Top-10 lists from each watchlist exceeded the return of the main list (IBD) or came close (ST50) the lists and their top tens were beaten by both the S&P and the Nasdaq, but much more so by the S&P. If we go back over the twenty weeks we have been keeping this score each watchlist has only beaten our market average 30% of the time. The IBD50 has not beaten the market since the end of October. From our calculation of weekly compounded returns, the market has produced a 5.6% profit. Using the same basis, both watchlists are at a loss of between 5% (IBD) and 10% (ST). To cap it off, it is worthy of note that of the top five performers from both the IBD and the ST lists, only one out of the top five performers from either list came from its top ten selection. And the others were generally from some way down the lists too. A simple buy-and-hold in the large-cap ETF DIA would have yielded you 7.33% over the same period. So we can conclude that maybe large cap stocks are better in favor as the cap-weighted SPY beat equal weight RSP over the same period by an 11% margin. But it is also an inescapable, although unseasonal observation that our watchlist writers just can’t get ahead just now.
Using our Vanguard ETfs as proxies, financials and energy beat the broader markets. It should be lost on no-one that the broader markets, and in the case of VTI, that’s really the broader market, gave the rest of the sectors a Santa Claus asswhuppin. It shouldn’t be lost on anyone that REITs are moving up again. Not shown, RWR, the SPDR REIT ETF moved up 4.12% this week. As a point of note, according to ETFDb.com. VNQ is the larget REIT ETF by assets if not volume traded.
Dividend ETFs moved back up the list this week, with the equal weight S&P ETF leading the pack.
The large-cap value stocks did best in style, and indeed, a quick scan using TC2000confirms that in December, large cap value ETFs have generally done well. Which not only brings us back to the Dogs of The Dow question, but also whether the Dogs of The S&P might not have some merit.