2013 was a great year for stocks, particularly in the U.S. So now may a great time prepare for conversations with clients about the strong year and level-set expectations for 2014. The Asset Class Dashboard can help reinforce your message with clients.
After the exceptional returns of 2013, the latest Asset Class Dashboard update shows returns moved back toward more typical ranges in January 2014.
As the end of the year approaches, it would be wise to begin resetting performance expectations and to consider the power of mean reversion. It is unlikely that asset class performance will continue to fall outside of the normal range. Every year, advisors and their investors should plan for the most likely scenario and build a plan around it.
Heady equity returns in October 2013 contributed to nudging the one-year returns for several asset classes near or beyond the upper bound of their historical typical ranges. On the flipside, some other asset classes came in lower than historical typical returns, and others performed in line with what history would have predicted.
This month’s reading of the Asset Class Dashboard reveals that equity and bond markets appeared largely undeterred in the face of government-related uncertainties around the globe.
As summer simmers down in the Northern Hemisphere, so too have returns in most major asset classes represented by relevant indexes. The August reading of Russell’s Asset Class Dashboard shows that 1-year returns ending in August have moved somewhat closer to center of their historical typical return ranges for most asset classes.
The July 2013 reading of the Asset Class Dashboard is somewhat reminiscent of the May 2013 reading of the Dashboard when 12-month equity returns were on the high end of their historical typical range. One difference in July, however, is that bonds and Commodities were weaker than they had been in May, falling below their historical typical range.