The year just passed delivered an unusually wide spectrum of results among the major asset classes. US equities were firmly in the lead, surging more than 30% in 2013. At the final bell for 2013, the biggest retreat was in commodities overall, which sunk more than 9%, based on the DJ-UBS Commodity Index.
In a year filled with an ample supply of surprising twists and turns, broad diversification remained competitive. The Global Market Index (GMI) was ahead last year by a bit more than 14%, dispensing a strong calendar-year performance and offering another reminder that outperforming Mr. Market’s asset allocation is as challenging as ever.
For the lucky (smart?) few who managed to beat the odds, last year’s recipe for success came in two basic flavors: overweight developed-world stocks (US equities in particular) and/or go light on bonds. It’s anyone’s guess what 2014’s winning strategy will be. That doesn’t stop the pundits from offering advice. But before you go off the deep end and embrace a self-proclaimed oracle’s forecasts, ask yourself a simple question: How do his predictions from a year ago stack up today?
Speaking of predictions, here’s one that’s likely to stand the test of time: GMI’s performance in 2014 will remain above average when we tally the numbers a year from now vs. a broad span of actively managed efforts intent on generating superior results. History suggests that’s a relatively safe forecast, which implies that you need a hefty dose of confidence (or hubris) to move dramatically away from Mr. Market’s portfolio mix in the year ahead.