Major Asset Classes | Sep 2014 | Performance Review

September was a complete rout. All the major asset classes suffered losses last month—the first calendar month of across-the-board red ink since June 2013.

At the top of the casualty list: emerging-market stocks (MSCI EM), which tumbled 7.4% in September. As for the notion of a “winner,” the definition was downsized last month. US bonds (Barclays Aggregate) delivered the smallest loss in September among the major asset classes: a relatively slight 0.7% decline. With no place to hide in September, the zero return on cash suddenly looks good.

Meantime, the Global Market Index (an unmanaged benchmark that holds all the major asset classes in market-value weights) declined 2.8% for the month—the biggest monthly setback in more than two years. On a year-to-date basis, GMI is still ahead by 3.1%. In fact, most of the major asset classes are still able to claim positive if modest returns so far this year. But the fourth quarter begins under a dark cloud and so the challenge at the moment is simply keeping one’s head above water between now and the end of the year.

If there’s a silver lining here, it’s lined with greenbacks. The US dollar has rallied sharply in recent weeks, posting a 3.9% rise in September, based on the US Dollar Index. That’s the only gain for last month’s performance ledger. The search for a safe haven is back in vogue.


5 thoughts on “Major Asset Classes | Sep 2014 | Performance Review

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  2. Tristan Grayson

    The TLT ETF (US long bond) is up 16.46% YTD (though down on the month). Maybe the US long bond should be a separate asset class in the GMI instead of being ’embedded’ in the Barclays US Aggregate Bond index? Historically, it seems that when risk assets go down, the only things going up are US treasuries, volatility indices and perhaps safe haven currencies.

  3. James Picerno

    Good point. In fact, thinking in those terms (how or if should Mr. Market’s asset allocation be customized?) is part of the reason for looking at the numbers in aggregated form. I don’t break out Treasuries, or any of the other asset classes, into finer slices because the focus for GMI is simply to generate a proxy for holding everything in market weights as a stepping stone for going to the next analytical level. But your intuition is spot on. In fact, one can make a case for focusing on small-cap value vs. a broad slice of US stocks, Asian markets vs. Europe, etc. But before we can go down that road, it’s important to first study what a passive mix sans rebalancing offers. In essence, GMI is the control group for analyzing/designing/managing portfolios.

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