Benchmark allocations have a large impact on performance - Dispersion abounds

Investors may not predict the future, but that does mean they should be indifferent to portfolio choices. Choices matter. A review of some well-defined benchmark comparison shows the dispersion in returns over the last twelve months. We have looked at the difference between a higher return strategy versus a lower return strategy. 

The largest return differentials over the last twelve months are between growth and value, in the favor of growth, the gain of large cap over small cap, and the information technology sector over the equity benchmark. These differentials should not be surprising. Information technology generally has been immune to the COVID19 Lockdown versus classic brick and mortar or cyclical equities. Small caps have not been able to gain scale during this downturn, and growth continue to outperform versus value. 

However, there are some surprises. There is little difference between the high beta and low volatility benchmark portfolios and little difference between the benchmark SPX and a momentum portfolio. The health care sector, mainly pharmaceutical and medical device companies, has outperformed the benchmark in spite of mass reduction of non-COVID19 health care expenditures.

What is most surprising is that the 12-month total return for the equity benchmark (SPX) is 12.84. An investor who fell asleep a year ago and woke-up today would feel as though the global investment environment is in a good place and the global economy is likely stable. Little would suggest the problems we are facing.