Returns from December 29, 2006 to December 28, 2007:
- DIA: [US]: Dow Jones Industrial Average ETF: +9.05%
- $NDX: [US]: Nasdaq 100 Index: +19.93%
- $COMPQ: [US]: Nasdaq Index: +10.73%
- SPY: [US]: S&P 500 ETF (Large Cap): +5.06%
- MDY: [US]: Midcap 400 ETF (Mid Cap): +8.04%
- IWM: [US]: Russell 2000 ETF (Small Cap): -1.91%
- EFA: [Int'l]: Developed International Market ETF: +10.64%
- EEM: [Int'l]: Emerging International Market ETF: +34.96%
- IVE: [US]: S&P 500 Value ETF: +0.17%
- IVW: [US]: S&P 500 Growth ETF: +8.55%
- IJJ: [US]: Midcap 400 Value ETF: +0.96%
- IJK: [US]: Midcap 400 Growth ETF: +13.15%
- IWN: [US]: Russell 2000 Value ETF: -11.08%
- IWO: [US]: Russell 2000 Growth ETF: +7.42%
Observation 1: 2007 International Returns Trounce US Domestic Returns
The Returns of International Markets, including those from the Developed World (mostly Western Europe, Japan, and Australia) and the Emerging Markets (including China, Brazil, Russia, Mexico, India, Taiwan, South Korea) are doing much better than the US markets. The Emerging Markets (EEM) have done much better than the Developed International Markets.
Observation 2: Outperformance of International Markets is Part of a Multi-Year Trend
The outperformance of International markets, especially Emerging markets, is part of a multi-year trend, where Globalization is a key trend.
- 2007 US SPY (S&P 500 ETF) Return: +5.06%
- 2006 US SPY (S&P 500 ETF) Return: +14.70%
- 2005 US SPY (S&P 500 ETF) Return: +5.13%
- 2004 US SPY (S&P 500 ETF) Return: +9.04%
- 2007 Int'l EFA (Developed Int'l ETF) Return: +10.64%
- 2006 Int'l EFA (Developed Int'l ETF) Return: +25.28%
- 2005 Int'l EFA (Developed Int'l ETF) Return: +13.94%
- 2004 Int'l EFA (Developed Int'l ETF) Return: +20.56%
- 2007 Int'l EEM (Emerging Int'l ETF) Return: +34.96%
- 2006 Int'l EEM (Emerging Int'l ETF) Return: +31.15%
- 2005 Int'l EEM (Emerging Int'l ETF) Return: +34.19%
- 2004 Int'l EEM (Emerging Int'l ETF) Return: +26.25%
Observation 3: 2007 Small Cap Returns lagged Midcap and Large Cap
Small Cap Returns, as represented by the IWM ETF, lagged midcap and large cap returns in 2007.
Observation 4: Small Cap Underperformance is a new trend, breaking multi-year trend
From April 11, 2003 to April 5, 2006:
- S&P 500 (Large Cap) Return: +54.77%
- Midcap 400 (Mid Cap) Return: +94.98%
- Russell 2000 (Small Cap) Return: +113.11%
From April 7, 2006 to December 28, 2007:
- S&P 500 (Large Cap) Return: +16.52%
- Midcap 400 (Mid Cap) Return: +9.77%
- Russell 2000 (Small Cap) Return: +2.99%
For many years, Small Cap stocks have outperformed Large Cap stocks. These trends tend to remain for many years, and we have recently seen the pendulum swing from favoring small cap stocks, to large cap stocks.
Observation 5: 2007: Growth Outperforms Value
In 2007, Growth outperforms Value through all US asset classes.
Observation 6: Growth Outperformance is a New Trend, Breaking Multi-year Trend
From July 28, 2000 to April 4, 2006:
- S&P 500 Value ETF: +31.08%
- S&P 500 Growth ETF: -24.2%
- MidCap 400 Value ETF: +132.78%
- MidCap 400 Growth ETF: +29.07%
- Russell 2000 Value ETF: +140.68%
- Russell 2000 Growth ETF: +7.29%
From April 7, 2006 to December 28, 2007:
- S&P 500 Value ETF: +13.47%
- S&P 500 Growth ETF: +17.63%
- MidCap 400 Value ETF: +5.76%
- MidCap 400 Growth ETF: 12.6%
- Russell 2000 Value ETF: -2.13%
- Russell 2000 Growth ETF: +7.4%
This makes sense. In the 1990s, Growth stocks prevailed and value lagged. From 2000 to sometime around 2006, Growth stocks suffered, and value stocks reigned supreme. Now that the value stock cycle has run its course, we are at the beginning of a multi-year growth stock run.
Observation 7: In 2007, the Large Cap Nasdaq Stocks outperformed
In 2007, the Nasdaq 100, 100 of the largest Nasdaq stocks (which is heavy in high tech stocks) outperformed the Nasdaq thanks to the performance of the larger capitalized stocks such as Apple (AAPL) and Google (GOOG).
Observation 8: The outperformance of Nasdaq stocks may be the start of a new trend.
From January 4, 1999 to July 21, 2000:
- Nasdaq 100 Index: +110.78%
- Nasdaq: +85.44%
- S&P 500: +20.06%
From July 20, 2000 to December 19, 2006:
- Nasdaq 100 Index: -55.32%
- Nasdaq: -41.94%
- S&P 500: +0.10%
From December 18, 2006 to December 28, 2007:
- Nasdaq 100 Index: +17.65%
- Nasdaq: +9.81%
- S&P 500: +4.81%
During the different periods, we see the Nasdaq outperform the S&P 500, then underperform the S&P 500 for many years. Recently, we've seen it change, and the Nasdaq is starting to outperform the S&P 500.
Typically the Nasdaq 100 seems to lead the Nasdaq either up or down. During the last period starting December 18, 2006, we notice that the Nasdaq 100 Index is leading the Nasdaq up.
Prediction over next several years:
If we assume that style trends tend to be multi-year trends, then over the next few years, we can predict that:
- Large Cap will outperform Small Cap Stocks (Early stages)
- Growth Stocks will outperform Value Stocks (Early stages)
- Nasdaq stocks and Nasdaq 100 stocks will Lead once again (Early Stages)
- International Markets will continue to outperform US stocks (Early to Middle Stages)
