On more than one occasion your editor has lamented the lack of good buying opportunities on the asset class level in 2006. If January’s experience so far is any indication, 2007 may be kinder for bargain-minded investors with an eye on the long term.
As our table below indicates, the red ink is starting to pile up this month. A few weeks hardly reveals much, if anything, about the strategic future for asset class returns. Nonetheless, we’re hopeful that the prospects for rebalancing are looking brighter relative to the recent past. No, we don’t hope for bear markets, but we’re prepared to take advantage of them when they inevitably return to one or more asset classes. That, as they say, is what makes strategic rebalancing go ’round.
Whatever’s coming, 2007 so far is clearly a change from recent years, when all the major asset classes tended to post gains. Indeed, 2006 wasn’t much different from 2005, 2004 or 2003 on that score. Make no mistake: we’re not complaining. We like bull markets across the asset class spectrum as much as the next fellow. But as a student of market history, we also realize that such parties can’t last forever, even if recent history suggests otherwise, without one of two players stumbling.