Year To Date Stock Market Performance

It's been a long time since I've blogged about market returns. This is by design. It's well documented that investor behavior is heavily influenced by short term market events. As such, I'm cautious towards producing too much performance related content. But, I'm sure all the astute readers of this blog always take the sensible long term view so I probably shouldn't worry too much. :)

The economic outlook is easily summarized- things aren't great, but they aren't anywhere near terrible. US Stocks have hit a wall. International stocks have regained their luster. Bonds are still boring. I could probably end here, but what would one of these posts be without at least one chart?

In this blog post we'll examine what's happened in both the US and Non-U.S. stock markets, followed by the actual returns, and of course my final thoughts.

U.S. Vs. International Stocks, A Role Reversal

Last year U.S. stocks returned 11.6%, while International and Emerging Market stocks lost -4.9% and -1.8%, respectively. By most accounts, the U.S. economy has successfully triumphed from the dark days of 2008. However, non U.S. stocks haven't seen the same rally.

Year to date U.S. stocks are barely breaking even. Economic data have diverged between labor market indicators (that show strength) and others (that show weakness). Case in point: retail sales were flat in April, but weekly jobless claims fell to an all time low.

Either productivity has slowed and will show up in reduced profit margins and wage growth (or both), or economic activity is being underestimated. The latter possibility should not be discounted entirely – “residual seasonality” may be distorting estimates of economic growth, activity may be shifting to less-reported service sectors, and falling prices may explain weakness in nominal series.

Just Show Me The Chart...

AGG: Bonds, VEU: International Stocks, IVV: U.S. Large Company Stocks, VWO: Emerging Market Stocks, IJR: U.S. Small Company Stocks

Year to Date Bond Return: 1.19%

Year to Date International Return: 9.28%

Year to Date Large Company Return: 1.93%

Year to Date Emerging Markets Return: 9.89%

Year to Date Small Company Return: 1.46%

To put these numbers into perspective, a balanced 60/40 portfolio has returned approximately 3.5% year to date.

Final Thoughts

It's fun to see what the various markets are doing when times are good. For 6 years straight times have been really good. This U.S. slowdown may mean something. It probably means nothing. Either way, I encourage everyone to buy a little of everything. When one part of the portfolio suffers, proper asset allocation is the best defense against the whole portfolio blowing up.

There is no point getting worked up about what the Mr. Market will deliver in the next year or two. I've tried to predict where things are going to come across smart. I've been wrong as much as I've been right. Wall Street has never been able to accurately and consistently predict which direction the winds will blow from. We shouldn't think we're any smarter.

If you're a client of Aspen Leaf Partners, know that we strictly adhere to Modern Portfolio Theory (MPT). Grounded in academic research, MPT suggests diversifying investments will both reduce risk and increase return over the long run.

For more info, please visit the Research & Portfolios pages on the company's website. Thanks for reading and have a great day!