U.S. Market Index Records Offer Food For Thought

Few retirement plan investors may actually mirror their portfolios to a U.S. total market index—but there are still some important implications to be found in the record-setting performance of the Wilshire 5000, beyond the relative growth of small-cap and large-cap.

The Wilshire 5000 Total Market Index, billed by its creators as “a pure and complete measure of the U.S. stock market,” gained an impressive 3.04% in November, closing the month at 27,356.70 for yet another record high.

According to data provided by Wilshire Associates, without counting dividends reinvested, the index had an estimated actual market value gain of $800 billion in November. Various sources are suggested for this strong monthly growth for U.S. stocks.

“Continued optimism about tax cuts coupled with positive outlooks on interest rates as well as the Fed and Fed chairman nominee powered the market,” suggests Robert Waid, managing director, Wilshire Associates.

With the November returns, the Wilshire index extended an unprecedented run of consecutive monthly gains, now to 13. Simply put, the growth has been remarkably steady: “The Wilshire 5000 set six more all-time highs in November,” Waid notes. “This marks 55 record high closes in 2017, and, as of November, the index has now posted positive returns for 20 of the past 21 months.”

Wilshire’s reporting shows November was the third time during those 21 months, and the first time since December 2016, that all tracked equity indexes and sectors were positive for the month. Notably, the large-cap portion of the index continued to outperform the small-cap side, marking its ninth month of outperformance over the past 11 months, with a gain of 3.06% vs. 2.86%, respectively. This resulted in a very strong year-to-date return of 20.40% for the Wilshire U.S. Large-Cap Index vs. a still-impressive 13.54% for the Wilshire U.S. Small-Cap Index.

For readers of PLANADVISER, perhaps less important than this 686-basis point performance spread for the preceding year is the associated shift in portfolio weights that come along with varied asset class performance across different exposures in the portfolio—as was measured during November with large-cap vs. small-cap stocks. Just like market lows, market highs should reinforce the importance of regular risk reviews and portfolio rebalancing.