By Jeremy Schwartz, CFA, Global Head of Research; Kara Marciscano, CFA, Senior Research Analyst
In 2006, WisdomTree launched its first family of fundamentally weighted Indexes, challenging the market capitalization-weight status quo.
Allocating weights based on dividends or earnings challenged the efficient market hypothesis by suggesting that rebalancing to fundamentals could enhance returns. Our fundamentally weighted alternative helps manage valuation risk inherent to cap-weighted strategies that give stocks with higher multiples higher weights and allow those stocks to run without rebalancing on relative value.
We weight our Domestic Core Equity Indexes by earnings because we believe it can lower the price-to-earnings (P/E) ratios a key metric for guiding risk and returns expectations.
Markets aim to begin 2021 similar to how 2020 ended
Thoughts
Markets are poised to begin 2021 similar to how 2020 ended, with a broad market rally. Last week saw a strong close to the year, with the S&P 500® Index touching its 33rd record close for 2020. The primary drivers of market strength continue to be optimism surrounding the vaccines and the benefits from the latest round of fiscal stimulus. The S&P 500 gained 68% from the March low after losing more than one-third of its value in less than a month, finishing the year with a return of 18.4%, the sixth-best performance in the past 20 years. Notable winners including the NASDAQ (+44.9%), the Russell 1000 Growth Index (+39.5%) and MSCI Emerging Market Index (+18.7%).
Low Inflation? Asset Prices at Record Highs Suggests Otherwise January 10, 2021
One of the keys to being a successful investor is making sure you’re getting the right facts. Otherwise, you run the risk of making investment decisions based on poor or faulty information.
The problem is, the media has a major trust issue. Many Americans put very little faith in the accuracy of the “news” they get from newspapers, TV, radio and social media. A Gallup poll in September found that 33% of Americans a full third don’t trust the media at all.
This would be distressing in any year, but it was particularly so during a pandemic and presidential election.