Major Asset Classes | December 2019 | Performance Review

It was a very good year for investors in 2019. So good, in fact, that it was impossible to lose money last year with simple buy-and-hold strategies that owned one or more of the major asset classes.

The biggest winner in 2019: US stocks. American shares surged 31.0% last year, based on the Russell 3000 Index. The gain was moderately ahead 2019’s second-best performer among the major asset classes: US real estate investment trusts (REITs). MSCI REIT Index climbed 25.8% last year after factoring in distributions. The weakest performance in 2019: cash via S&P US T-Bill 0-3 Index, which gained 2.2%.

Note, too, that for the trailing 3- and 5-year windows, only broadly defined commodities lost ground. Otherwise, all the major asset classes have posted gains based on a start date of 2014’s close. That’s an extraordinary bull run that effectively offered a powerful tailwind for virtually any asset allocation mix. If genius is a bull market, it’s tempting to argue that the world was up to its eyeballs in skilled money managers over the past five years.

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Turning to December’s results, emerging markets stocks dominated trading. Shares in this corner rebounded sharply last month as the MSCI Emerging Markets Index jumped 7.5%.

There were only a handful of losses in 2019’s final month of trading. Red ink was limited to a fractional decline for US investment-grade bonds (Bloomberg US Aggregate Bond Index) and a 0.7% setback for US REITs (MSCI REIT Index), the deepest decline in December.

With global markets reflecting widespread gains for the year just passed, the Global Markets Index (GMI) posted a stellar run. This unmanaged benchmark that holds all the major asset classes (except cash) in market-value weights gained an impressive 21.1% in 2019. In December, GMI was up 2.3%. The benchmark’s robust increase of late is a reminder that active asset allocation strategies had a tough time keeping up with simple buy-and-hold benchmarks last year.

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