October 1, 2009
THE RETURNS OF SEPTEMBER
It's becoming repetitive, but no one's complaining. September witnessed across-the-board gains in all the major asset classes. Again.
With some minor exceptions, the world's capital and commodity markets have been on a non-stop rebound since March. That's not exactly surprising, given the depth of the previous losses in almost everything. When you stretch returns to extremes in a short period, a reversal in the opposite direction is typical. Deciding how long it will last is the trick.
In sum, the good times can't last, at least not in terms of tidy gains as far as the eye can see. There's a reason that diversifying across asset classes has merit, even if it's not obvious these days. But correlations among the various subgroups of stocks, bonds, REITs and commodities are destined for a wider divergence. Designing and managing portfolios, as a result, will become more challenging in the years ahead.
But not today. For the moment, everyone's a winner regardless of asset allocation. Enjoy it while it lasts.
Posted by jp at October 1, 2009 6:26 AM
Hi Jim. They were all overvalued and correlated on the way down so why not repeat the experience on the way up?
As the FT has reported, it seems to be hedge funds driving this rally not "organic" buying. They were forced to delever when the credit crisis hit and now that everything has been backstopped they are relevering and pushing prices back up. So much for "investing".
We should enjoy this while we can. For my part I am taking money off the table here and have been since we crossed 1050 on the SP500.
Posted by: Mark at October 3, 2009 6:06 AM