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S&P 500 SOARED AGAIN 

Stocks posted an +8.6% gain in 2Q2021, after a +6.2% gain in 1Q2021, a +12.2% gain in 4Q2020, an +8.9% gain in 3Q2020 and a +20.5% surge in 2Q2020, which followed the COVID bear market in 1Q2020 of -19.6%. Not only did the S&P 500 recover from the -33.9% COVID bear market loss, but it broke its pre-pandemic high.

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20-YEAR EQUITY RISK PREMIUM

The S&P 500 stock index, in the 20 years ended June 30th, 2021, averaged an +8.61% annual return, compared to +1.26% on a risk-free 90-day U.S. Treasury bill. Investors earned a +7.35% premium annually for taking the risk of owning U.S. stocks over the 20-year period. Stocks are risky but have paid off handsomely.

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WORST INDUSTRY SECTOR GAINED +15.8%

All 11 industry sectors of the S&P 500 gained sharply in the one-year period ended June 30, 2021. It was the second straight quarter in which all 11 sectors showed positive returns. Despite the unprecedented risks, stocks across all industries delivered returns ranging from outstanding to breathtaking.

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INDEXES TRACKING 13 ASSET CLASSES

Of these 13 indexes tracking a diverse group of investments, No. 1 by far for the five years ended June 30, 2021, was the S&P 500. That’s why U.S. stocks are the growth engine of retirement portfolios. Ironically, the factors driving the outperformance by U.S. stocks are easily overlooked by investors.

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WHAT DRIVES RETURNS

The S&P 500 is the growth engine of investors worldwide because the U.S. is the world’s leading economy. The U.S. is not just the world’s largest economy, it’s the most stable and dynamic system worldwide in modern history. This is often an overlooked fundamental principle driving portfolio strategy.

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BUBBLENESS

The largest five companies in the S&P 500 have been trading at low PEG ratios relative to the other 495 stocks. The average company in the S&P 500, as of July 9, traded at a PEG ratio of 3.3%, while the Big Five traded at a PEG ratio of just 0.98%—a large discount to the other 500 companies in the S&P 500.

Past performance is never a guarantee of your future results. Indices and ETFs representing asset classes are unmanaged and not recommendations. Foreign investing involves currency and political risk and political instability. Bonds offer a fixed rate of return while stocks fluctuate. Investing in emerging markets involves greater risk than investing in more liquid markets with a longer history.