US Stocks Rebounded Last Week As Emerging Markets Tumbled

American shares recovered with a strong gain for the trading week through Friday, July 23, posting the highest increase for the major asset classes, based on a set of exchange traded funds.

Vanguard Total US Stock Market (VTI) rallied 2.3% last week, recovering all the losses in the previous week and then some. By the end of Friday’s trading, VTI settled at a new record high.

At the other extreme, stocks in emerging markets suffered the deepest decline for the major asset classes last week. Vanguard FTSE Emerging Markets (VWO) fell 1.9%, dropping to the lowest close in over two months.

The combination of slowing growth in China and a strengthening US dollar are headwinds for emerging markets stocks, say analysts.

Measuring how all the major assets performed as one strategy reflects a solid gain last week. An ETF-based version of the Global Market Index (GMI.F) rose 1.4% — the best weekly gain in a month. This unmanaged benchmark (maintained by CapitalSpectator.com) holds all the major asset classes (except cash) in market-value weights via ETF proxies.

For the one-year window, US stocks continue to lead, if only slightly. VTI is up 40.7% on a total-return basis over the past 12 months. That’s modestly ahead of the second-best one-year performer: Vanguard US Real Estate (VNQ), which is up 39.3% over the past year.

US investment-grade bonds remain the only one-year loser for the major asset classes. Vanguard Total Bond Market (BND) is off 0.8% for the past year, even after factoring in distributions.

GMI.F’s one-year gain is a strong 26.1%.

Ranking the major asset classes via current drawdown still shows that most of our proxy ETFs currently enjoy peak-to-trough declines of no more than -5%. US stocks (VTI) are the current leader for this metric via a 0% peak-to-trough decline as of Friday’s close. Meanwhile, commodities (GCC) are posting the deepest drawdown: nearly -30%.

GMI.F, by contrast, is at a record high and so the benchmark’s peak-to-trough decline is currently zero.

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