Major Asset Classes | August 31, 2011 Performance Update

The summer from hell may be history, but the wounds still smart as stocks took another beating in August. For the fourth straight month, equity markets around the world tumbled. U.S. stocks (Russell 3000) were down by a hefty 6.0%, the deepest monthly decline since May 2010. Foreign equities in unhedged dollar terms fared even worse, with developed markets (MSCI EAFE) off by 9% and emerging markets (MSCI EM) down by 8.9%. In other words, it’s been close to non-stop selling for stocks since May.

Bonds, by contrast, continue to benefit from the rush to safe havens. The Barclays Aggregate Bond Index soared again by nearly 1.5%. Foreign government bonds in developed markets (Citigroup WGBI ex-US) did even better with a gain of 1.8% last month.
But the rise of fixed-income wasn’t able to offset the deep across-the-board losses in equities. As a result, our passive, value-weighted benchmark of all the major asset classes took another hit. The Capital Spectator’s Global Market Index (GMI) sunk 3.8% in August, its biggest monthly decline in more than a year. True to form, the equal-weighted version of our benchmark (GMI-E) suffered less, dropping by a lesser 2.4%
For the year so far through the end of August, GMI and its counterparts are still posting gains, but just barely. Compared to stocks, however, that looks pretty good. Over the last three years, the unmanaged GMI still earned 3.4% a year.
Four consecutive months of red ink for stocks isn’t unprecedented, but it’s sufficiently rare to inspire hope that September will offer something better. If so, it may be time for bonds to share some of the burden.

2 thoughts on “Major Asset Classes | August 31, 2011 Performance Update

  1. Brian

    Are the 1YR and 3YR returns of the foreign bond indices (devlp’d and emerging) reflective of coupon interest earned as well as USD depreciation? Or are they just straight price indices of the underlying foreign bond values (w/o accounting for coupon interest accrued and USD depreciation over that period)?

Comments are closed.