Equity returns came back to their winning ways in February, compared to their performance just one month earlier. Historical equity-diversifying asset classes – bonds and real assets – also posted positive returns for the month. All of this likely helped many balanced investors make back some of their losses from January 2014.
Market performance varied month to month in the first quarter of 2014, but for the most part, diversified and balanced portfolios were rewarded.
After the exceptional returns of 2013, the latest Asset Class Dashboard update shows returns moved back toward more typical ranges in January 2014.
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.
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.