Global Asset Class Performance (As at 21st December 2018)

Probably 2018 is the year where conservative investors could proudly say

Cash is King! Cash is King! Cash is King!

(with annual 1.8% return)

Key points

  1. Almost every single asset class (stocks around the globe, government & corporate bonds, commodities) have posted negative returns or unchanged performance year to date.
  2. Basically investors have no place to hide, except for those who holding cash.
  3. Only US treasuries bond has slight return; the rest were all down. The asset class returns were the rarest in 10 years’ period.

Looking back during the financial crisis in 2008, at least government bonds and gold worked. Even in 2015, when a majority of asset classes finished in the red, at least stocks and Treasury’s squeaked out positive returns. 

Summary on asset class performance

  1. Assets: Only US dollar rose slightly, and the rest were all negative.
  2. Equities: Russia has turned positive to negative, Brazil has turned positive from negative, and the rest are all negative.
  3. Sectors: Only the “public utilities” are left with positive, and the rest are negative return.
  4. Fixed income: The US treasury yield is rising and the risk aversion emotion is strong.
  5. Exchange rate: Only US dollar is positive; the rest were all negative.
  6. Commodities: The price of oil dropped from the first to the last place, only natural gas from the energy category was remained.

 

The reason behind

Over the last 9 years, many assets have experienced bull market due to Quantitative Easing stimulus by Federal Reserve to save the economy during the financial crisis 2008.

Many companies have taken this opportunity to borrow with low rates for business expansions and company shares buy back, this in turn fuelled a boom in stocks. A lot of the easy money has injected into stocks and lifting equity valuations to high levels. But now that process is unwinding.

The Federal Reserve has accelerated the two-pronged approach tightening monetary policy process through raising interest rate and balance sheet reduction. This has led to all assets to underperformed in 2018. It will be difficult to find pockets of outperformance when the Fed is actively trying to deflate asset bubbles (Ian Lyngen, head of U.S. rate strategy).

 

To my investors

Asset allocation and discipline are the keys in investment. Kindly refer to the message I sent privately to you on details of portfolio allocation and rebalancing.  



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