I was looking last night at the performance of the main indices for 2023 through yesterday. They rank as follows:
S&P 500 +5.5%
Russell 2000 +0.5%.
I think the Russell 2000 is always an index worth keeping an eye on because it’s much more representative of the US economy than the other two, which have very large weightings in specific industries (like tech in NASDAQ) or exposure to foreign economies (which makes up roughly half the profits of the S&P 500).
So far this year, the general US economy has been the worst place to be. Better to have tech exposure or foreign earnings, which have been boosted by strong currencies vs. the US$. That’s partly because other countries are beginning to show some signs of economic vigor, mostly, though, because foreign central banks are beginning to withdraw stimulus–i.e., higher interest rates are causing many foreign currencies to rally vs. the dollar.
I noticed an online article the other day (Yahoo Finance?), reporting an interview with Cathie Wood of the ARK funds. Ms. Wood was apparently critiquing the major stock indices–NASDAQ and S&P 500, I think–for having old stodgy, no-longer-disruptive companies like the FAANGs in them. Odd, I thought. If the indices are so lame, that should make them easy to beat. One’s best course of action would more likely be to keep quiet about these deficiencies and accept credit for besting a low bar rather than trashing the benchmarks.
Then I looked at the indices themselves. Over the past five years, performance has been as follows:
S&P 500 +52.2%
Russell 2000 +15.5%
Ark Innovation (ARKK) -1.2%.
During the nine months following the early 2020 pandemic lows, ARKK quadrupled while NASDAQ doubled. ARKK gave back all that outperformance in the following year, and has been generally underperforming NASDAQ since, ex some signs of relative life during January of this year.