Despite the shock Britain's historic vote to leave the EU delivered to the financial markets, the second quarter saw most asset classes deliver positive returns. International stocks were the only major asset class down in the quarter. The best performing asset classes were long-term bonds, REITs, and Commodities.
In part one of our quarterly recap we looked at the bumpy ride over the last three months and we saw how a disciplined approach paid off. Now let’s look at two common questions investors are currently considering. The questions are:
Q1 Asset Class Performance
The S&P 500 eked out a seemingly benign 1.4% return in the first quarter—an unremarkable result but a bumpy ride. This positive return came despite the “worst 10-day start to a calendar year ever,” and Q1 became the first quarter since 1933 to fall by as much as 10% and still finish with a positive return.
2nd Quarter Market Performance
- International stocks continue to outperform U.S. stocks in 2015
- Rates on long-term bonds moved up around half a percent in the quarter
The second quarter was not a particularly exciting one for most investors. Returns ranged between up 1.1% in Pacific market stocks (Japan, Australia, Korea, Hong Kong, Singapore) to down 1.7% in the most widely tracked bond index (the Barclay’s Aggregate bond index).
Long-term interest rates, measured by the 30-year Treasury yield, moved up by half a percent in the quarter—but this didn’t spell doom for investors. And as we covered last quarter, this rise in rates doesn’t automatically spell trouble for stocks and, other than the longest duration bonds, there wasn’t a major impact on intermediate and short-term bond investments either.
- Futures are an agreement to purchase something in the future with the price set today.
- Managed futures funds typically seek to capture returns by taking advantage of “momentum” in investment prices.
- Investing in managed futures is not as straight forward as other investments. There are several things to be aware of.
Last time on the blog, we reviewed first quarter performance. One of the best performers was the asset class of ‘managed futures’. As part of these quarterly investment reviews, our aim is to provide an overview and educate you on different parts of the portfolio so you will understand why we include them in certain portfolios.
Let’s take a deeper look at managed futures and learn what drives its returns.
1st Quarter Market Performance
- Investments in most areas had positive returns in the first quarter.
- For the first time in a while, U.S. stocks were not the best place to be.
- Commodities were down in the quarter, but still serve a role in the portfolio.
Investments in most areas (i.e., asset classes) were up in the first quarter of 2015. But, it was the first time in a while that U.S. stocks didn’t lead they way. They’ve done quite well over the last few years making almost any form of diversification feel, at least a little, painful.
However, just as trees don’t grow to the sky, no single asset class will outperform forever. The first quarter of this year is a good reminder of this fact.