WealthManagement Magazine

The Big Calm

Having trouble convincing clients that the equity market isn't such a wild place? Give them a quick history lesson: Turns out that the past two years have been some of the least volatile since 1996, according to a report entitled Investor Perception versus Reality by Denver-based asset manager ICON Advisers. That is, at least when you measure the equity market using the S&P 1500, a broad-based capitalization-weighted

Having trouble convincing clients that the equity market isn't such a wild place? Give them a quick history lesson: Turns out that the past two years have been some of the least volatile since 1996, according to a report entitled Investor Perception versus Reality by Denver-based asset manager ICON Advisers. That is, at least when you measure the equity market using the S&P 1500, a broad-based capitalization-weighted index comprising 1500 large-cap, mid-cap and small-cap stocks.

The table at left represents the risk/return history of the S&P 1500 based on rolling 12-month periods through Oct. 31, 2005, for the past 10 years. It's noteworthy that 2004 and 2005 are two of the lowest risk years in that period. Additionally, the trailing average annual returns for these two years were nearly 10 percent, consistent with historical long-term trends.

According to ICON, market fundamentals are positive and domestic stocks are presently undervalued by approximately 20 percent. “Based on this measure, we believe the opportunity cost of letting false perceptions guide investors away from equities seems high,” says the report.

Headline
Year Annualized Standard Deviation (%) Trailing 12-Month Total Return Ended 10/31 (%)
2005 8.6% 9.71%
2004 7.11 9.83
2003 13.62 22.01
2002 19.82 -14.03
2001 18.05 -23.64
2000 15.26 8.16
1999 13.19 24.96
1998 20.58 19.03
1997 16.01 32.19
1996 8.4 23.12
AVERAGE 14.07% 11.13%
Source: ICON Advisers, Factset Research Systems
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