April is not the cruellest month, at least not for those who went long. Virtually every asset class posted big gains during the period. Only TIPS (t-bills indexed to inflation) and foreign developed market bonds lost ground.
Emerging market stocks set the pace, with a whopping 9.1% return for the period. REITs and foreign developed markets stocks came in next at 6.4% and 5.5% respectively. US equities didn’t do too poorly either: 4.9%.
But don’t get your hopes up. Given the emerging consensus that we’re all set for a V-shaped recovery, it’s probably a head fake.
From The Capital Spectator:
Proving, if nothing else, that the link between sentiment on the economy and performance in the markets can be weak if not missing in action in the short run. As everyone now recognises, the U.S. economy is challenged these days. As our post yesterday suggests, the economy may remain challenged for some time. Even so, don’t assume that in any given month the capital and commodity markets will provide corroborating performance evidence in sympathy with what ails on a macro level.
Meantime, diversification across asset classes is still the only prudent game in town. Since we don’t know what the future has in store for us, we’re inclined to own everything. The value added (if any) comes by focusing on whether, and how much to deviate the weightings of the major asset classes relative to Mr. Market’s weights, as per capitalisation for stocks and bonds and an equivalent for commodities. But proceed cautiously. As we detailed last month, beating the global market portfolio is no mean feat. Most investors could do a lot worse than tapping into the passively allocated portfolio of all the world’s major asset classes.
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