September has been a cruel month for risky assets, although bonds continue to defy gravity. As uncertainty rises on a number of fronts, risk aversion has taken on a life of its own… again. But the search for a safe haven has narrowed recently to U.S. fixed income, Treasuries in particular. The greenback is popular once more, advancing in excess of 6% over the last month, based on the U.S. Dollar Index. The world’s reserve currency comes with a fair amount of baggage these days, but for the moment the buck is still considered the safest, or at least the safer paper port in a storm. It’s no trivial detail that the rising appetite for dollars comes at a time of heightened fears for the euro’s survival. It all adds up to crumbling prices for foreign bonds in broad terms for both developed- and emerging-market nations when measured in dollar terms. Here’s a closer look at how the bloodletting has been unfolding in the major asset classes via our usual list of ETF proxies…
US STOCKS • Vanguard Total Market (VTI) • Benchmark: MSCI US Broad Market Index
A vote of no confidence for the economic outlook…
FOREIGN DEVELOPED MARKET STOCKS • Vanguard Europe Pacific (VEA) • Benchmark: MSCI EAFE
There seems to be even less macro optimism for non-U.S. developed economies…
EMERGING MARKET STOCKS • Vanguard Emerging Markets (VWO) • Benchmark: MSCI Emerging Market
The deterioration in sentiment is afflicting emerging-market stocks too…
US BONDS • Vanguard Total Bond Market (BND) • Benchmark: Barclays US Aggregate
Worries about what comes next has inspired a rush to safety…
INFLATION-INDEXED US TREASURIES • iShares Barclays TIPS Bond (TIP) • Benchmark: Barclays US TIPS
Inflation-indexed Treasuries remain a port in the storm, but is the crowd becoming more cautious here?
HIGH YIELD BONDS • SPDR Barclays High Yield Bond (JNK) • Benchmark: Barclays High Yield Very Liquid
No sign of ambiguity in junk…
COMMODITIES • iPath Dow Jones-UBS Commodity (DJP) • Benchmark: DJ-UBS Commodity
Commodities are in broad retreat (and gold is no exception this time)…
REAL ESTATE INVESTMENT TRUSTS • Vanguard REIT (VNQ) • Benchmark: MSCI US REIT
Real estate is suffering too …
FOREIGN DEVELOPED MARKET GOVERNMENT BONDS • SPDR Barclays Int’l Treasury (BWX) •
Benchmark: Barclays Global Treasury ex-US Capped
Thanks to euro fears and a surging dollar, the safety net in foreign government bonds has evaporated…
EMERGING MARKET GOVERNMENT BONDS • Van Eck Market Vectors Emg Mkt Local Currency Bond (EMLC) •
Benchmark: J.P. Morgan GBI-EMG Core
Emerging market bonds aren’t holding up either…
FOREIGN GOVERNMENT INFLATION-LINKED BONDS • SPDR DB International Inflation-Protected Bond (WIP) •
Benchmark: DB Global Government ex-US Inflation-Linked Bond Capped
Foreign inflation-indexed government bonds have lost their allure as well…
FOREIGN CORPORATE BONDS • PowerShares International Corporate Bond (PICB) •
Benchmark: S&P International Corporate Bond
Investors aren’t giving a pass to foreign corporate bonds either…
Charts courtesy of StockCharts.com