Breaking News

Markets Flat Since The Election? Not Really

By Cumberland Advisors (David Kotok)Stock MarketsDec 24, 2012 12:48AM ET
Markets Flat Since The Election? Not Really
By Cumberland Advisors (David Kotok)   |  Dec 24, 2012 12:48AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
We are scheduled to interview on Bloomberg TV at 9:15 AM, Monday, December 24 with anchor Betty Liu on “In the Loop.” Our discussion will likely include markets and factors like the fiscal cliff and debt limit debates.

“The market has been flat since the election,” said one pundit in a recent interview. “Really?” I thought. Not by our data.

The pundit’s case was that the post-election Obama-Boehner uncertainty is the cause. The pundit added that uncertainty trumped the economy, currency, Fed policy or other factors. Hmmmm, I thought. Let’s take a look.

In fact, when examined from Election Day to December 21 close, the S&P 500 Index ETF total return since the election is 0.60%. The appropriate ETF symbol is SPY. Okay, that is really flat. But is it flat because of the alleged uncertainty, or is there another reason for this lackluster number? Our finding is that it is due to something else, that a rotten Apple is in the barrel.

Apple (AAPL) is weighted heavily in the S&P index. In fact, when Apple peaked at around $700 a share, it was significantly larger in market cap than Exxon (XOM) or IBM (IBM) or General Electric (GE).

Here are some comparisons to think about as we refute the pundit. The S&P MidCap 400 Index ETF (MDY) is up 2.5% since the election, while the S&P 600 SmallCap Index (IJR) is up 2.6% in the same period. Guggenheim’s S&P 500 Pure Value ETF (RPV) is up about 4% in that period.

RevenueShares Large Cap ETF (RWL) is up 1.4%. This ETF is weighted by revenue and not by market cap. It contains a similar composition of stocks as SPY, but the weighting in the ETF is different. Apple is weighted less heavily in RWL than in SPY.

RSP is the symbol for the Guggenheim Equal Weight 500 ETF. Same stocks as in the cap weighted index, but the distribution is close to equal. Apple is only a small influence on the performance of this ETF. Since the election, RSP is up 2.1%.

Our conclusion is that the bull market remains intact since the election. Most stocks are rising in price and are discounting other and positive factors, not just the negative of uncertainty from politics. Looking at the benchmark SPY offers a distorted view because of the heavier weight of Apple. Maybe the pundit needs to eat some applesauce.

Disclosure: Cumberland’s US ETF managed accounts presently hold RSP, RPV and RWL. We do not hold SPY at the present time.

BY David R. Kotok

Markets Flat Since The Election? Not Really
Markets Flat Since The Election? Not Really

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Are you sure you want to delete this chart?
Write your thoughts here
Replace the attached chart with a new chart ?
Post also to:
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Post 1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
Sign up with Email