Last month was kind to risky assets. Indeed, there was no red ink in January for our broadly defined benchmarks of stocks, bonds, REITs and commodities. Ironically, cash (3-month T-bills) retreated ever so slightly on a monthly basis. Otherwise, the overall performance in this year’s first month was the best since last October, with the Global Market Index (a passive, market-value weighted mix of all the major asset classes) rising a robust 4.0% last month.
The big winner was emerging market stocks: the MSCI EM Index popped a hefty 11.3% in January. The relative loser: U.S. bonds, which reported a 0.9% gain last month. Even so, that’s a fairly healthy rise for this asset class in the context of its history. For the moment, the bond bubble that many have predicted has yet to show its teeth.
If your investment strategy didn’t turn a tidy profit last month, you’re either overweighted in cash or you’re doing something wrong. We don’t often see months like January, when returns are healthy and far flung. Rest assured, the easy money won’t last. But for a brief, fleeting moment, at least, recent history makes everyone look like a genius.