A Benchmark for Spry Growth at Modest Risk
The coronavirus plague that ravaged the global economy in 2020 continued to linger in diminished form during the past year. On the upside, though, the real economy as well as the stock market trudged ahead without any major problems.
After thrashing around during the spring and autumn, the bourse reached all-time highs by the end of 2021. As a result, the flagship benchmark – namely, the S&P 500 Index (SPX) – rose by 26.9% from the previous year.
When the stock market forges ahead, high-growth stocks tend to outrun their plodding peers. On the glum side, though, high-flying firms in China broke down en masse this year. Among them was Alibaba – a component of the MintKit Growth Index (MGX) – which plunged by 49%. Other washouts in the Index included a couple of mining firms, each of which lost around one-quarter of its value. As a result, the benchmark advanced by just 13.2% during the year.
From a broader stance, however, the MGX still managed to outpace the SPX. To wit, the Growth Index gained 18.4% per year on average since its debut, as opposed to 15.5% for the S&P yardstick over the same stretch.
From a different angle, the MGX upon its launch was set to unity (1); that is, 100 percentage points. Given this baseline, the Index reached 196.6695 points at the end of last year.
Looking downstream, the outlook for 2022 is roughly comparable to the previous year’s. The real economy will continue to recover from the drubbing dealt by the pandemic. In that case, the stock market should tramp higher as well.
As usual, the revised roster for MGX takes a moderately aggressive approach. To wit, the goal for the new year centers on ample growth at modest risk rather than huge potential at great peril.
On a fulfilling note, this will be the fifth and last year of the current experiment that began in 2018. That is, the project to maintain and appraise the MGX will conclude at the end of 2022.
On the other hand, the basic methodology behind the Growth Index will prevail for the foreseeable future. An example involves an expansion of the screening procedure to include option contracts as well as common stocks, or a variation among the weights assigned to the members of the Index. In these and other ways, the studies downrange will break free of a number of artificial fetters imposed on MGX during the current experiment.
NOTE: The report is a slide presentation under the title of “MintKit Growth Index – Update 2022”. The briefing is available in PDF mode at MintKit Gist.
* * *