Major Assets: Risk Assets Strong While Safe Assets Have Negative Trends (VWO, DBC, FRN, GLD, IEF, MUB, SHV, BWX, CFT)

Another week went by with risk assets being in much favor. This is especially true for the traditionally considered ‘riskiest’ assets including emerging market equities (NYSE:VWO), commodities (NYSE:DBC),  frontier market equities (NYSE:FRN) and gold (NYSE:GLD). For the week, they were all up more than 1%. For more detailed performance, see here

The following table shows the trend scores for all major asset ETFs: 

Assets Class Symbols 03/04
Commodities (DBC) 16.8% 16.74% ^
US Stocks (VTI) 10.61% 13.06% v
Gold (GLD) 9.66% 9.84% v
International REITs (RWX) 9.33% 11.37% v
US Equity REITs (VNQ) 8.47% 12.41% v
Emerging Market Stks (VWO) 7.17% 7.07% ^
International Developed Stks (EFA) 7.15% 9.77% v
US High Yield Bonds (JNK) 4.99% 5.55% v
International Treasury Bonds (BWX) 3.49% 2.85% ^
Frontier Market Stks (FRN) 2.22% 1.08% ^
US Credit Bonds (CFT) 1.09% 0.76% ^
Emerging Mkt Bonds (PCY) 0.29% 0.07% ^
Total US Bonds (BND) 0.05% -0.04% ^
Treasury Bills (SHV) 0.01% 0.03% v
Intermediate Treasuries (IEF) -0.27% -0.52% ^
Mortgage Back Bonds (MBB) -0.55% -1.21% ^
Municipal Bonds (MUB) -1.24% -1.08% v

The trend score is defined as the average of 1,4,13,26 and 52 week total returns (including dividend reinvested). 

From the above table, we can see the often considered ‘safe’ assets: Intermediate Treasuries (NYSE:IEF), Morgage Back Bonds (NYSE:MBB) and Municipal bonds (NYSE:MUB) all have negative trends, meaning they under performed against even cash (NYSE:SHV). We have seen this again and again this year. Risk appetite is high right now. 

For the fixed incomre portion of a portfolio, at the moment, the international bonds (NYSE:BWX) and investment grade corporate bonds (NYSE:CFT) still offer some good value. International bonds (NYSE:BWX) has been doing well amid the weakness of US dollars: Powershares US Bullish (NYSE:UUP) is down more than 2% year to date. 

Year to date, the portfolio with commodity exposure is outperforming the one without commodity. The following table shows the comparison: 

Portfolio Performance Comparison

Portfolio Name YTD AR 1Yr AR 1Yr Sharpe 3Yr AR 3Yr Sharpe 5Yr AR 5Yr Sharpe
Five Core Asset Index ETF Funds Strategic Asset Allocation Moderate 1.86% 16% 127% 6% 27% 8% 33%
Six Core Asset ETFs Strategic Asset Allocation Moderate 2.92% 16% 131% 5% 22% 7% 35%

As we pointed out in a separate article, simply adding commodity asset (NYSE:DBC) to a strategic asset allocation portfolio does not necessarily enhance the risk adjusted return. For the moment, positioning in risk assets, especially in commodities and US stocks (NYSE:VTI) has done well. One, however, needs a systematic way such as a tactical asset allocation strategy to manage risk. 

Disclosure: MyPlanIQ does not have any business relationship with the company or companies mentioned in this article. It does not set up their retirement plans. The performance data of portfolios mentioned above are obtained through historical simulation and are hypothetical. 

Written By The Staff Of

LTI Systems, Inc. is the operator of MyPlanIQ.comand The founders of LTI Systems have extensive technology and business background in computer and semiconductor industries. They have been using the strategies provided by MyPlanIQ for their own personal retirement and taxable investments. The mission of LTI Systems is to make wealth management investment strategies that are used to be only accessible to institutions and high net worth individuals available to private investors with a fraction of flat cost and ease of use. The founders of LTI Systems, investors themselves, take pride in creating such a system and service for investors by taking the perspective from the investor side. They are using the system and the strategies for their own investment and align their interests with their customers.  

MyPlanIQ’s blog provides periodical articles to discuss issues related to retirement plans (401(k), 403(b) and IRAs), deferred compensation plans (457), college savings plans (529), taxable brokerage investment accounts, variable annuities and universal life insurance plans. It also covers investment strategies, specifically strategic and tactical asset allocation and investment products such as ETFs and mutual funds. In addition, it syndicates daily articles that are related to retirement planning, personal finance, investment strategies, annuities, insurance, college savings and market/economic outlooks. It provides a comment and discussion community for readers.

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