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A Tale of Two Markets


It’s a safe assumption that when Bob Dylan sang “the first one now will later be last,” he didn’t have financial markets in mind. And yet, that line—from the iconic “The Times They Are a-Changing”—neatly sums up the importance of a dynamic, flexible approach to investing.

To see why, look back two years ago. On August 19, 2020, the tech-heavy Nasdaq 100 was up 30% for the year—while dividend-stock investors saw their shares slump nearly 18% (Dow Jones US Select Dividend Index).

In stark contrast, the story on August 19 this year was flipped. Dividend stocks were solidly in the black in 2022, while the Nasdaq 100 (down 18% year-to-date) is trying to avoid dipping back into bear market territory.

The gap between Nasdaq’s 2020 return and its 2022 return is a whopping 48 percentage points.

The upshot: Major market events and pullbacks are not all built the same. In 2020, tech stocks benefited from (among other factors) Covid lockdowns and restrictions that prompted greater tech usage, while uncertainty about the pandemic’s ultimate impact put a damper on dividend payers. Fast forward to today, and investors are seeking the relative safety of dividend-paying stocks in the wake of rising inflation and interest rates while eschewing high-flying tech stocks that depend heavily on strong future growth and discount rate assumptions. 

Navigating dynamic markets like these will likely require more than naively doing what worked in the past. We believe employing a robust multi-disciplined process that utilizes quantitative and qualitative assessments of macro-level developments to guide investment decisions may be helpful. 

This commentary is written by Horizon Investments’ asset management team.

The Nasdaq 100 Index is a basket of the 100 largest, most actively traded U.S companies listed on the Nasdaq stock exchange. The Dow Jones US Select Dividend Index represents the country’s leading stocks by dividend yield.

Nothing contained herein should be construed as an offer to sell or the solicitation of an offer to buy any security. This report does not attempt to examine all the facts and circumstances that may be relevant to any company, industry or security mentioned herein. We are not soliciting any action based on this document. It is for the general information of clients of Horizon Investments, LLC (“Horizon”). This document does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. Before acting on any analysis, advice or recommendation in this document, clients should consider whether the security in question is suitable for their particular circumstances and, if necessary, seek professional advice. Investors may realize losses on any investments. Index information is intended to be indicative of broad market conditions. The performance of an unmanaged index is not indicative of the performance of any particular investment. It is not possible to invest directly in an index.

Past performance is not a guide to future performance. Future returns are not guaranteed, and a loss of original capital may occur. This commentary is based on public information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied on as such. The opinions expressed herein are our opinions as of the date of this document. These opinions may not be reflected in all of our strategies. We do not intend to and will not endeavor to update the information discussed in this document. No part of this document may be (i) copied, photocopied, or duplicated in any form by any means or (ii) redistributed without Horizon’s prior written consent.

The investments recommended by Horizon Investments are not guaranteed. There can be economic times when all investments are unfavorable and depreciate in value. Clients may lose money. Asset allocation cannot eliminate the risk of fluctuating prices and uncertain returns.

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