Futures are pointing higher this morning after yesterday's muted, perhaps even boring, rally that left stocks at record highs yet again. It was the 48th record close of the year for the S&P 500 (^GSPC) which has now gained 12.2% for 2014.
Yesterday's real action was in the Russell 2000 (^RUT) which gained about 1%. That great day brings the small cap index all the way back to up 1.35% for the year. Inflation is almost non-existent, yet small caps are underperforming both rising prices and wage rates.
Small cap investors are not alone. According to Lipper, through the last week of November 85% of active large cap fund managers are losing to their benchmark index. That's the worst year in the last three decades.
For the vast majority of investors the spread between their performance and the total market has been huge. The S&P 500 is up 45% since the start of 2013. About one-third of that has come just since mid-October's V bottom. According to the awesome Yahoo contributor Dana Lyons there have been nine distinct sharp sell-offs followed immediately by rallies in the last 23 months, about 5 times as many as is normal. That's brutal for individual investors and pros alike.
What can you do about it? As always, my advice is to do less. Focus on managing your own emotions and health during this party season. Half the people I talk to in the mornings are still a little groggy from parties the night before. Hangovers, underperformance anxiety and sleep deprivation are a toxic cocktail for investors.
Remember, the best trade is usually not trading at all. Get some sleep, exercise every day and try to maintain a reasonable schedule. For the 9 out of 10 of you who are lagging the market all I can say is you can't catch up all at once. For the other 10% I have no suggestions other than perhaps considering a little charitable giving to those who can't afford to take part in the stock market at all.
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