Chris Dietrich
speaker
73 appearances
1 recordings
1 series
first heard Oct 2017
last heard Oct 2017
Chris Dietrich’s voice in public audio — every appearance, attributed to the second.
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Appearances
Right.
So the Dow, if you include dividends, is up nearly 19 percent this year.
Over the past 12 months, it's up closer to 32 percent.
So this tremendous rally that we've seen has really persisted on an almost like day in, day out basis where we've seen dozens and dozens of all time highs.
That's something I think that anybody who pays attention in this space has known.
But what's particularly interesting is that it's occurred with this very low day-to-day volatility.
And so if you think about pairing the two, it really means it's been a particularly and historically unusual easy ride for investors over the past year.
Yeah, the Sharpe ratio was created in the 60s by a Nobel laureate, and it's really a way to keep tabs on how much reward investors are getting relative to the risk that they take.
So when a given stock or a mutual fund goes up a lot, but it shifts around, it's incredibly volatile, it might end the year up 100%, but it'll be down 50%.
That's a very low Sharpe ratio, something that goes up a lot that has had very little volatility and therefore lower risk has a very high Sharpe ratio.
And so we see now with the Dow is this incredibly high, higher than almost 100% of all readings since 1900.
And all that means is it's been an incredibly easy ride for investors.
Yeah, don't come close to it.
And we're just measuring it over the past year.
And there's a lot of different time periods that you can measure something like a Sharpe ratio.
So like over 15 years, the Sharpe ratio for the Dow was something like 0.7.
Over the past year, it's many magnitudes higher than that.
It's around 4.5.
So it's just this really stark illustration of how unusual the markets have been recently.
Yeah.
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