When the calendar year turns, investors invariably look to the previous year’s marketperformance for direction on where to invest. While the instinct is often to add to winning sectors and cut losses elsewhere, chasing performance in this manner can land investors in trouble.
Indeed, according to Goldman Sachs, in 17 of the last 25 years, the stocks that lagged the S&P500 ended up becoming the leaders in the following year.
Winning and losing sectors again traded places in 2015 and 2016. As revealed in the adjacent charts, Aggressive growth style mutual funds which led the market in 2015 – brought up the rear in 2016. On the flipside, value-style funds, many of which focus on stocks tied to the economy, rebounded strongly in 2016.
What will 2017 bring? If 2016 is any guide, plenty of surprises – and hence the need for portfolios to stay diversified. For a full discussion of our outlook, please reference our forthcoming Quarterly Market Report.
Source: Bloomberg, Hefren-Tillotson. Data as of 11/20/2016. PAST PERFORMANCE DOES NOT PREDICT FUTURE RESULTS
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