Asset Allocation & Rebalancing Review | 23 July 2013

The rout in asset classes that took a bite out of prices in June has subsided in recent weeks. The losers on a year-to-date basis aren’t bleeding as much and the winners have mounted a modest revival this month. The range of returns is still fairly extreme, but the range is also a bit more skewed to the upside than we’ve seen recently, relatively speaking.

Overall, around 30 percentage points still separate the leader from the loser so far this year, or roughly unchanged from the performance spread in our previous update. At the leading edge (when viewed through the prism of broadly defined asset classes): US stocks, which are higher on the year by nearly 21%, based on our proxy ETF (Vanguard Total Stock Market (VTI)). On the flip side, emerging market stocks are still languishing at the bottom of the horse race (Vanguard FTSE Emerging Markets ETF (VWO)), albeit on the heels of a modest rebound so far in July.
For another perspective on how the year stacks up so far, here’s a recap of an equally weighted portfolio of all the major asset classes in terms of relative changes to the asset allocation. Using a start date of Dec. 31, 2012, the chart below depicts the current portfolio structure vs. the range of allocations year to date. The strategy for this illustration is equally weighting everything and letting the unmanaged allocations fluctuate freely through yesterday’s close (July 22).

Finally, here’s a graphical review of how the major asset classes have performed this year (based on daily closing prices) in relative terms through July 22, 2013. In the chart below, all the ETF prices have been reset to 100 as of Dec. 31, 2012: