Decline: Comment
Worldwide ETFs Rolling One-Year Returns
vs Benchmark Indexes: No Surprise Here--Yet
Weekly
4.5 years June 27, 2003--January 4, 2008
See Comments below
Comments 1/18/2008 11:00 a.m. ET
No surprise here. Everybody's returns look like this--all mutual funds, hedge funds, trust portfolios, insurance-company equity funds, endowments, your own stock holdings. What makes this chart different? It shows a continual set of rolling returns, that is its a moving series of snapshots, one week after the other. Each week's snapshot looks back 52 weeks ago to see what the one-year rate of return has been from the week of lookback. The curves then move one week ahead and look back again, and so on. Why do this? It gives a true return picture of what's going on underneath the surface and a much better anticipation of what to expect. The usual, long-term, single, rising line that depicts past results does not do this.
There is no escape. These subsurface waves lie both hidden (and visible with instrumentation) everywhere. Change and cycles are integral to the fabric of the universe. There is no known exception--from microorganisms to galaxies--at least at this point in the state of the art of human perception.
How to read the chart. Take the date April 28, 2006, the highest red peak near the calendar middle of the chart. On that date, the rolling 52-week (one year) Worldwide System return was +62.6%. On the same date, the Nasdaq 100 was +19.7%, the S&P500 was +13.3%. The next week the rolling one-year returns for all three were lower--and so on down to the trough date for the System, September 22, 2006, when the one-year returns were +8, +3, and +8% respectively. The horizontal lines are the averages of all the rolling one-year periods for each series. There are 236 of them, a reasonably good sample size, absent a ten-year or longer record which does not yet exist.
What does the chart say? Periods of rising returns are followed by periods of falling returns. It appears that the markets may now have embarked on a period of falling one-year returns. Should that be a concern? Well, no. It may be uncomfortable while going on, but the reason we put up with the discomfort is the payoff that comes from the larger-than-average payoffs that come from the rising parts of the cycle. Remember?
See here. Yes, but can it fail? More on that with the next chart.
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