May: Best and Worst Asset Classes of 2008
May/20/08 03:57 PM Filed in: 6 Monitor and
Rebalance
We follow about 25 asset classes. Of those, here is
what we're seeing in 2008:
What asset classes are winning in 2008 as of Friday, May 16?
1) +28.86% - Commodities (GSG)
2) +14.58% - Natural Resources (IGE)
2) +10.85% - Domestic Real Estate Investment Trusts (VNQ)
What asset classes are losing in 2008 as of Friday, May 16?
1) -4.76% Domestic Listed Private Equity (PSP)
2) -4.12% Domestic Micro Cap Stocks (FDM)
3) -3.46% International Listed Private Equity (PFP)
What about the broad markets?
Domestic Stocks (SPY): -2.17%
Domestic Bonds (AGG): +2.05%
International Stocks (EFA): +1.08%
International Bonds (BWX): +6.39%
Emerging Market Stocks (EEM): +3.19%
Emerging Market Bonds (PCY): +0.94%
Our Comments: Predicting the short term movement of any asset class is similar to predicting the weather, but over the long run we can be quite certain of their return. Therefore, the historic performance of an asset class gives us the best guidance for long term future returns.
We know that the long term returns of commidities are about 10%. When they outperform this rate for a period of years we should remind ourselves that they will have to eventually go through a severe correction to revert to their mean returns.
While we often include an allocation to commodities in clients' portfolios, we are well aware that the odds of a severe downward correction are increasing. Earlier this year we were rebalancing into real estate and domesitc stocks (at the time they were underperforming); now we are evaluating reblancing into underperforming classes like private equity and micro cap. This helps us manage the risk of our portfolios and ensures that we are selling high and buying low.
Important Disclosure
What asset classes are winning in 2008 as of Friday, May 16?
1) +28.86% - Commodities (GSG)
2) +14.58% - Natural Resources (IGE)
2) +10.85% - Domestic Real Estate Investment Trusts (VNQ)
What asset classes are losing in 2008 as of Friday, May 16?
1) -4.76% Domestic Listed Private Equity (PSP)
2) -4.12% Domestic Micro Cap Stocks (FDM)
3) -3.46% International Listed Private Equity (PFP)
What about the broad markets?
Domestic Stocks (SPY): -2.17%
Domestic Bonds (AGG): +2.05%
International Stocks (EFA): +1.08%
International Bonds (BWX): +6.39%
Emerging Market Stocks (EEM): +3.19%
Emerging Market Bonds (PCY): +0.94%
Our Comments: Predicting the short term movement of any asset class is similar to predicting the weather, but over the long run we can be quite certain of their return. Therefore, the historic performance of an asset class gives us the best guidance for long term future returns.
We know that the long term returns of commidities are about 10%. When they outperform this rate for a period of years we should remind ourselves that they will have to eventually go through a severe correction to revert to their mean returns.
While we often include an allocation to commodities in clients' portfolios, we are well aware that the odds of a severe downward correction are increasing. Earlier this year we were rebalancing into real estate and domesitc stocks (at the time they were underperforming); now we are evaluating reblancing into underperforming classes like private equity and micro cap. This helps us manage the risk of our portfolios and ensures that we are selling high and buying low.
Important Disclosure