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If you are looking for a reason to make a change to your portfolio, today’s market provides plenty of options.
Artificial intelligence continues to drive enormous investment and enthusiasm in the stock market. Oil prices have been volatile amid conflict in the Middle East. Treasury yields have climbed above 5%, and the Federal Reserve recently raised interest rates for the first time in several years. At the same time, technology stocks have continued to flirt with record highs.
Depending on which headline you focus on, you could probably make a convincing argument to buy, sell, get more defensive, or chase what has been working.
That is precisely the problem.
Investing has always presented us with compelling reasons to believe we know what comes next. The harder question is whether acting on those beliefs actually improves results.
Fortunately, we have decades of evidence showing what happens when professional investors try to do exactly that.
Twice a year, S&P Dow Jones Indices publishes its SPIVA scorecard comparing actively managed mutual funds with their respective benchmarks. The latest report, through June 30, 2026, paints a remarkably consistent picture.
Look at the far-right column.
Over the past 20 years, nearly 95% of all domestic equity funds underperformed their benchmark. The numbers were similarly challenging across the market. More than 92% of large-cap funds, 90% of mid-cap funds, and 91% of small-cap funds underperformed.
Among large-cap growth funds, the figure was an astounding 99.5%.
These are not inexperienced investors trading from their phones. They are professional money managers with research teams, sophisticated technology, and access to enormous amounts of information.
You might expect skill to reveal itself over longer periods. Instead, the data generally moves in the opposite direction. As the measurement period gets longer, the percentage of managers falling behind tends to rise.
Why?
Markets are extremely competitive. Prices reflect the collective opinions of millions of investors, all processing much of the same information. To outperform, an active manager has to identify opportunities that other investors have missed, and do it often enough to overcome management fees, trading costs, taxes, and inevitable mistakes.
That is a difficult hurdle.
Stock selection is only one way investors try to outguess markets. Market timing, another common approach arguably raises the degree of difficulty. Instead of merely identifying which investments will outperform, a successful market timer has to make two decisions correctly: when to get out and when to get back in.
The first decision often feels easier. When markets are falling, and the headlines are getting worse, moving to the sidelines can feel prudent.
The second decision is where things become complicated.
Markets generally do not wait for uncertainty to disappear before recovering. Prices move as expectations change, often well before the news feels comfortable again. An investor who successfully avoids part of a decline can still hurt their long-term return if they wait too long to reinvest.
In hindsight, market turning points often look obvious. In real time, they rarely do.
That helps explain why the temptation to make changes never really disappears. There is always another election, recession concern, war, interest-rate decision, valuation debate, or new technology competing for our attention. Having more information does not necessarily make the future easier to predict. Sometimes it simply gives us more reasons to form an opinion.
None of this means investors should ignore what is happening in markets. Interest rates matter. Valuations matter. Earnings matter. Risks matter. They help us understand the environment in which we are investing.
Understanding the environment, however, is very different from believing we can reliably predict what markets will do next.
A better approach is to focus on the things we can control: maintaining an appropriate asset allocation, diversifying broadly, keeping costs and taxes in mind, periodically rebalancing, and making sure the portfolio remains aligned with the financial plan.
There will always be a compelling reason to believe this time is different. Today it might be artificial intelligence, interest rates, inflation, or geopolitical uncertainty. A few years from now, the list will look completely different.
What probably will not change is our desire to turn those concerns into investment decisions.
The SPIVA data is a useful reminder of just how difficult that has been, even for professionals whose full-time job is to beat the market. The objective does not need to be predicting every winner, avoiding every decline, or finding the perfect time to invest.
A better objective is building a diversified portfolio that fits your plan and giving it enough time to work.
The headlines will keep giving us reasons to act. Good investing often means knowing when not to.
Week in Review
- Labor Market: The August JOLTS report showed job openings fell by 256,000 to 7.1 million. Hiring remains relatively cautious, but layoffs continue to be historically low, helping keep the labor market stable.
- Federal Reserve: The Fed raised its target interest rate by 0.25% in September, bringing the range to 3.75%–4.00%, as inflation remains above its 2% target. Fed officials currently expect one additional 0.25% increase by year-end, while financial markets are pricing in roughly 0.50% of additional hikes.
- Corporate Earnings: S&P 500 earnings grew 52% in the second quarter, the strongest growth since 2021. Energy led the way, with earnings up 146% from a year ago. FactSet currently expects S&P 500 earnings to grow another 26.7% in the third quarter, which would mark the third straight quarter of growth above 25%.
Hot Reads
Markets
- Warsh Takes Hawkish Turn with Rate Rise and Hints of More to Come (WSJ)
- Surging Treasury Yields Pose a Brand New Problem For Kevin Warsh and The Fed (CNBC)
- Fed's Williams Hints Next Rate Increase Can Wait (WSJ)
Investing
- October Has a Dark History of Financial Crashes (Jason Zweig)
- A Brutal Bond Market (Ben Carlson)
- Financial Lessons (HumbleDollar)
Other
- The Senate Just Passed a College Sports Law. Here's What it Does (WSJ)
- How Has Nebraska Adjusted Its Offense to Compliment Anthony Colandrea's Skill Set? - BTN (YouTube)
- How to Explain Something Complicated - TED-ED (YouTube)
Markets at a Glance
Fund Returns
Sector Returns
Factor Returns
Source: Morningstar Direct.
Source: Morningstar Direct.
Source: Treasury.gov
Source: Treasury.gov
Source: FRED Database & ICE Benchmark Administration Limited (IBA)
Source: FRED Database & ICE Benchmark Administration Limited (IBA)
Economic Calendar
Source: MarketWatch
- Competition, Achiever, Relator, Analytical, Ideation
Josh Jenkins, CFA
Chief Investment Officer, Principal
Josh Jenkins, Chief Investment Officer, began his career in 2010. With a background in investment analysis and portfolio management from his previous roles, he quickly advanced to his current leadership position. As a member of the Lutz Financial Board and Chair of the Investment Committee, he guides Lutz Financial’s investment strategy and helps to manage day-to-day operations.
Leading the investment team, Josh directs research initiatives, while overseeing asset allocation, fund selection, portfolio management, and trading. He authors the weekly Financial Market Update, providing clients with timely insights on market conditions and economic trends. Josh values the analytical nature of his work and the opportunity to collaborate with talented colleagues while continuously expanding his knowledge of the financial markets.
At Lutz, Josh exemplifies the firm’s commitment to maintaining discipline and helping clients navigate market uncertainties with confidence. While staying true to the systematic investment process, he works to keep clients' long-term financial goals at the center of his decision-making.
Josh lives in Omaha, NE. Outside the office, he likes to stay active, travel, and play golf.
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