There’s been an interesting disconnect of late in the financial realm between high-profile corporations and the nation’s largest stock markets, which long-time financial advisor Dawn Bennett warns should be a signal to all investors. Since 2003, about 80 percent of the largest cap portfolio managers in the United States have performed worse than the S&P 500, to the point of sustaining negative caps. Even companies generally considered to be consistently successful, like Amazon, McDonald’s, General Electric and MGM Resorts, just to name a few, have experienced marked drops, touting negatives of up to 49 percent. In any other financial landscape this would be taken for what it is: slightly surprising and an indication of a weakening economy; yet, today’s falling values are countered by a rising stock market that shockingly contradicts portfolio behaviors. As Bennett notes, the S&P 500 and Dow continue to not only outperform major portfolios, but are reaching unprecedented levels. Given that portfolios have decreased in value across industries in companies of all sizes, what exactly is causing the stock market’s success?
According to Bennett, the answer lies with the Federal Reserve. The S&P 500, Dow and NASDAQ are only kept afloat by artificial practices like high-frequency trading and derivative implementation that don’t accurately reflect the reality of the financial landscape. Stocks continue to depreciate, yet unsuspecting investors distracted by these successful markets remain unaware and continue to invest. And this type of speculative market, as Bennett underscores, is highly problematic.