The typical American's investments have risen 3.4 percent since President Clinton's election, according to Money magazine's Small Investor Index. That 12-week gain, fueled mostly by strongly rebounding stocks, is equal to 15 percent at an annual rate of 6 percentage points more than individual investors have earned, on average, since 1970.
The Clinton rally stopped short of being a full-fledged bonanza for small investors only because they keep an average of 39.4 percent of their investments in low-yielding money-market funds and certificates of deposit. For the 12 weeks, money funds and CDs have earned less than 1 percent, or about 3 percent on an annual basis.Stocks, 36.6 percent of the typical individual's portfolio, returned 6.7 percent over the 12 weeks, or 32 percent at an annualized rate. The biggest gains came from shares of small companies, which have shot up 15.7 percent since the election.
Bonds, 22.9 percent of the portfolio, gained 3.3 percent, or 15 percent at an annual rate. Because many high-income investors have been flocking to municipal bonds in anticipation of income tax hikes, munis have provided a 5.8 percent return, or 27.6 percent annually.
Analysts say that the Clinton rally is likely to continue as long as the president's plan for spending to create new jobs doesn't boost the nation's annual deficit by more than $20 billion or so. A bigger increase, however, could push up interest rates and hurt both stocks and bonds, according to Hugh John-son, chief investment officer at First Albany Corp.
Last week, the typical individual investor's portfolio, as tracked by the Index, rose $139 to $45,135. Stocks gained $38, and bonds returned $88. CDs and money funds contributed $10, while gold added $2.