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Asset Class Performance in 2014
Old 01-29-2015, 12:51 PM   #1
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Asset Class Performance in 2014

Callan has updated their Callan Periodic Table of Investment Returns to include 2014.



You can see that in 2014, the top performing asset class was the S&P500 Growth (US large cap growth) category. No S&P 500 category has held the top spot since 1998. After all three categories of the S&P500 US large cap (growth, all, and value), the Barclays Aggregate Bond Index which represents the total US bond market all outperformed other equity asset classes. The worst performer in 2014 was the international developed markets (MSCI EAFE). Emerging markets was next worst, and US high yield corporate third worst.

I like to look at this table as a reminder that asset classes that perform well one year, may reverse the next. And sometimes an really poorly performing asset class recovers spectacularly the next year. Sometimes an asset class may outperform or underperform few consecutive years before reversing.

And - it's all relative!!!

The table gives absolute performance as well as relative. Only the international asset classes were negative in 2014. If you look at 2008, you'll see that only one asset class was positive - the US total bond market, and next best performing asset class was down 26% (US Corp High Yield), and was in the same 2nd place position the next year, but had a huge recovery return of 58% the very next year. Bonds are often at the bottom of the pack, but usually still positive even when they lag. If an equity asset class is at the bottom of the pack, it is usually negative, and sometimes really negative!

So absolute matters too - but relatively.

You can get the whole PDF which also explains what asset class each index represents here: https://www.callan.com/research/files/989.pdf
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Old 01-29-2015, 01:16 PM   #2
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Always enjoy looking at the Callan " periodic table," confirms rotation, and why passive investors diversify. And why trying to predict/time is tough at best, rebalancing is the easy way.
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Old 01-29-2015, 01:22 PM   #3
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Did you notice that the balanced funds are generally right in the center of average performance most years? As a retiree I like the odds they provide me vs. trying to guess what will happen in the upcoming year. Fidelity shared this same info with 401 k investers this morning pointing out the performance of balanced funds.
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Old 01-30-2015, 06:39 AM   #4
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Quote:
Originally Posted by audreyh1 View Post
Callan has updated their Callan Periodic Table of Investment Returns to include 2014.



You can see that in 2014, the top performing asset class was the S&P500 Growth (US large cap growth) category. No S&P 500 category has held the top spot since 1998. After all three categories of the S&P500 US large cap (growth, all, and value), the Barclays Aggregate Bond Index which represents the total US bond market all outperformed other equity asset classes. The worst performer in 2014 was the international developed markets (MSCI EAFE). Emerging markets was next worst, and US high yield corporate third worst.

I like to look at this table as a reminder that asset classes that perform well one year, may reverse the next. And sometimes an really poorly performing asset class recovers spectacularly the next year. Sometimes an asset class may outperform or underperform few consecutive years before reversing.

And - it's all relative!!!

The table gives absolute performance as well as relative. Only the international asset classes were negative in 2014. If you look at 2008, you'll see that only one asset class was positive - the US total bond market, and next best performing asset class was down 26% (US Corp High Yield), and was in the same 2nd place position the next year, but had a huge recovery return of 58% the very next year. Bonds are often at the bottom of the pack, but usually still positive even when they lag. If an equity asset class is at the bottom of the pack, it is usually negative, and sometimes really negative!

So absolute matters too - but relatively.

You can get the whole PDF which also explains what asset class each index represents here: https://www.callan.com/research/files/989.pdf

historically , if i remember , everytime it has been only about the s&p 500 it took 5 years on average of underperformance of the s&p 500 to unwind the excessive advance.
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Correlations
Old 01-30-2015, 02:02 PM   #5
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Correlations

This is an interesting data set. I love the presentation. I thought it would be interesting to actually look at the correlations between the different indices. So I graphed the returns of 5 of the indices against the S&P 500. The correlation coefficients probably won't surprise anyone:

Russell 2000 +.72
MSCI EAFE +.65
Barclay High Yield +.42
MSCI Emerging Markets +.18
Barclay Agg +.002

Anyone done this with a longer duration data set?
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Old 01-30-2015, 02:35 PM   #6
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One class excluded from the chart is REITs. The index was up 30% or so for 2014.
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Old 01-30-2015, 04:00 PM   #7
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One class excluded from the chart is REITs. The index was up 30% or so for 2014.
I was going to comment on that also. The REITs asset class is almost as volatile as emerging markets, but I've found it to be a good diversifier as it behaves completely differently from all my other asset classes. And yes, it would have been at the top of the chart for 2014, outperforming US large cap by 2X.
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Old 01-30-2015, 07:17 PM   #8
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The correlation of REITS to other assets classes has varied a lot over time. For the last few years REITS have been fairly well correlated with the US stock market, but in previous years they have moved more independently. Some analysts believe that the "sync" between REITS and equities is a permanent feature (because REITS are no longer thinly traded, among other reasons), others believe they'll de-link again in the future.

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Source: Source: Correlations Calculated by Rick Ferri using CRSP Total Return and S&P Dow Jones Select REIT as reported by Dimensional Fund Advisors.

Original article: REITs And Your Portfolio - Forbes
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Old 01-30-2015, 08:55 PM   #9
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Originally Posted by samclem View Post
The correlation of REITS to other assets classes has varied a lot over time. For the last few years REITS have been fairly well correlated with the US stock market, but in previous years they have moved more independently. Some analysts believe that the "sync" between REITS and equities is a permanent feature (because REITS are no longer thinly traded, among other reasons), others believe they'll de-link again in the future.

Source: Source: Correlations Calculated by Rick Ferri using CRSP Total Return and S&P Dow Jones Select REIT as reported by Dimensional Fund Advisors.

Original article: REITs And Your Portfolio - Forbes
My personal experience has been that they diverge often. Which isn't quite the same as delink, but the amplitudes of behavior are so different that rebalancing is usually needed annually. FRESX Fidelity Real Estate Investment Port Fund FRESX chart
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