Stocktake: Beating the market was ‘nigh-on impossible’ in 2019
If you didn’t overweight technology, you had little chance of beating the market
The large-cap US market led the world, with smaller US stocks, international equities, fixed income, and commodities all trailing in its wake. Photograph: Brendan McDermid/Reuters
Few active managers are expected to beat the S&P 500 in 2019. That’s not unusual, given that S&P Dow Jones Indices’ SPIVA scorecard routinely documents that managers underperform. Still, a confluence of factors meant 2019 was especially tricky for managers, notes S&P’s Chris Bennett.
Why? One way of beating indices is by overweighting or underweighting certain stocks. However, the five biggest stocks in the index averaged gains of 51 per cent – bad news for managers, given most are uncomfortable overweighting a stock that’s already a large component of the index.
Similarly, the biggest sectors outperformed the smallest sectors; if you didn’t overweight technology, you had little chance of beating the market, given the sector gained over 50 per cent.
Thirdly, investors who ventured outside the S&P 500 were penalised for doing so. The large-cap US market led the world, with smaller US stocks, international equities, fixed income, and commodities all trailing in its wake.
Recent data from Société Générale’s Andrew Lapthorne echoes this analysis, Lapthorne noting that just one in five of 16,000 global stocks outperformed the S&P 500 over the last two years.
Markets are always “hard to beat”, says Chris Bennett. However, 2019’s range of circumstances “made ‘hard to beat’ become nigh-on impossible for the S&P 500”.