You Get What You Pay For: Stock Market Update, Friday December 5, 2025

Almost everyone I know likes a Deal. A good Black Friday savings deal.  Maybe a 20-30% off sale or discount.  Unfortunately, when it comes to the stock market, more often or than not, over the long term, you get what you pay for.  While the overall S&P 500 has average around 10% per year over the last 100 years and around +15% per year the last 5 years, the annual return profile is far from linear each and every year.

If you invest long enough, you likely endure unrealized losses and downside volatility of varied sizes each and every year if you are invested in the S&P500 or any other index. The reward for investing in equities is the return. The “risk” is enduring the downside volatility at times. Here’s some great data from Charlie Bilieo on annual drawdowns and their frequency.

Look at the above chart. -5% decline in the S&P500 happens nearly every year, while a -10% decline happens, twice that rate, happens nearly every year and a half.  The treaded bear market decline of -20% happens a little over once every 4 years while a recessionary decline of -30% happens 1 out of 10 years.  Investors, if you invest long enough, expect at some point during your lifetime that the S&P500 will lose half its value.  Given its rarity, let’s call that a generational decline.

Even within the S&P 500 there is a wide discrepancy of where this annual return comes from. Over the last few decades, higher quality, high marginal return on invested capital companies that are growing faster or more consistently have tended to outperform lower growth, higher indebted companies. However, with this growth profile, often comes a higher level of annual variance in stock returns.  We’ve seen this dynamic play out over the last few years post Covid shutdown.

Many times, clients and prospects have expressed “all I want is higher returns with less volatility”. Yes, we educate them, that’s not how investing in public equities work.  I wish it was that simple. Unfortunately, when it comes to “risk” measured by return volatility and reward measured by annual return, over long time periods, you get what you pay for.

Yes, there are times when the market shifts what its rewarding from a style perspective.  The new term that institutional investors are using is “Factors”.  Sometimes pure price momentum is rewarded. That’s when investors buy a group of stocks because well, other investors are buying those stocks, and they are exhibiting price momentum vs. the indexes.  Other times investors look for accelerating fundamentals from a revenue and earnings standpoint to buy.  We’ve just been through a 2-month period where there was a titanic short-term shift in what factor investors were rewarding. Since mid-October, the highest growth equities lagged the overall market at the expense of more GARP, growth at a reasonable price, or even small cap value stocks being rewarded.

Let’s follow the data if you want a recent example of what I’m talking about.  I’m going to use return data since we exited Covid in 2q2020.  So, the data I’m presenting is from April 1, 2020 through 11/28/25.  I’m taking the S&P500 equity index as the base return because that’s what most equity investors now days compare themselves to as over 50% of all flows now are into that index. The growth equity vehicle I’m using is the Nasdaq Composite, ticker CCMP and the more value biased index everyone knows I’m using is the Dow Jones Industrial ticker INDU.

Here’s the absolute return detail of these 3 indexes over the post Covid time period, approximately 5.5 great years for equities off the Covid lows.

The annualized total return for all 3 indexes off the lows were greater than 17.5%. The S&P500 returned 21.41% CAGR, the growth biased NASDAQ Comp 23.48% and the slower growth, more value biased Dow Jones, 17.78%/cagr.  All great numbers.  All not likely to be continued in 2026. However, to achieve the highest CAGR return of the Nasdaq comp, one also had to endure higher downside volatility.

For example, in 2022 the markets experience an earnings recession and the S&P500 dropped -27.5%+ from peak to trough.

The higher growth Nasdaq fell by an even larger % during this time, falling by over –37.7% peak to trough amounting to an additional % loss of almost 37% vs the S&P500 on this decline.

Alternatively, the more value biased and higher dividend yielding INDU index declined as well but it fell by less than the S&P500, about -22.3% during this same time, amounting to almost 19% less than the S&P500’s fall.

While a lower magnitude difference, an investor will see a similar dynamic played out during this years March/April Tariff tantrum with the growth indexes falling by a higher percentage than the S&P500, and the value biased, higher dividend yield indexes falling by less peak to trough.

Let’s fast forward to November and get more granular on what happened in various indexes and sectors in the markets during a volatile month to show you just how hard it is to change horses or styles mid race.

US equities were mixed in November with the S&P500 bouncing hard, over +3.5%, Thanksgiving week to finish +0.1% for the month. The NDX was down -1.6% while the INDU was up about .5% in a volatile month.

The main overall theme was big tech stock and AI weakness and a rotation into defensive stocks. Following very strong YTD performance, Technology stocks dropped (-4.4%) and they were the worst performing sector in the US on the month. Of course, tech stocks have been the best YTD performer and best since the Covid low 5.5 years ago but that trend reversed sharply during November. Had the markets not rallied significantly over the last 4 days of the month, this weakness would have been even more apparent.

How bad was November for YTD growth leaders? Well AI-related stocks baskets, including Neo cloud (-19%), Semis (-5.8%) and Data Centers (-4%) ended the month with big losses. The Mag7 stocks declined -3.1% and that’s with Google being up almost +14% in November.  NVDA declined (-12.6%), weighing on the group, despite strong earnings.

Post early April tariff low leaders in the retail trading themes got punished in November with Crypto (-17%) and Meme Stocks (-10.2%).  Economic offense stocks in Cyclicals declined (-7.4%), while more Defensive equities, which have materially lagged YTD as well as since the Covid lows, outperformed with a gain of +11.2%. Healthcare stocks led sectors up +9.1% in November, benefiting from cheaper valuations and tariff clarity.

With all this said year to date, as of this writing, the growth oriented Nasdaq was still up almost 21.75% YTD almost completely price return, the core SP500 index up almost 17.8% in total return split between about 16.45% price and 1.3% in dividends while the more value biased, Dow Jones index was up almost 13.9%, about 12% in price and another 1.9% in dividends. But investors remember, you get what you pay for and to generate the higher growth of the Nasdaq growth stock index, you had to endure much higher volatility in the form of larger downside losses during the April -21% selloff as well as Novembers brief -6% decline in the S&P500.

What does all this mean to you?

Our advice to viewers is meet with your financial advisor and determine how much risk, or potential losses you are comfortable with over your given investment horizon. From there, your advisor should be able to design a portfolio of investments blended from tools that weigh capital growth, capital preservation or income generation, that will best meet your needs over your retirement so long as you stick to your plan and don’t try to change horses or rider’s mid race.

However, investors remember there are no guarantees in investing in equites even though over long periods of time, they’ve proven one of the best ways to save, compound wealth and combat inflation.

Investors, whether you desire growth or income, or a combination of both in your portfolio, the entire OHFG team is here for our clients doing what we can to plan for you and your family’s future regardless of what stage you are at in your career or retirement.

Do you need a retirement plan that goes beyond allocating funds to truly fit your needs? We can help you create a retirement life plan customized for your retirement vision and legacy. Call us at 877-896-0040 or fill out this form for a free visit: https://click2retire.com/lets-connect