Sophie Gilbert is Director, Capital Markets Insights
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This month’s reading of the Asset Class Dashboard shows that, while cash is still the only asset class whose most recent 12-month returns fell outside the historical typical range, returns for many asset classes moved higher above their historical averages.
April gave the markets quite a bit to digest. In the end, markets gave both those investors who were expecting a pullback and those who hoped the U.S. equity market rally of the first quarter wasn’t coming to an end quite yet, what they were looking for.
Following the strongest U.S. equity market start to the year since 1997, Russell’s global strategist team has updated their outlook for the remainder of 2013. They remain positive, but expect gains will likely be limited by a mature earnings cycle, reasonably full valuations and moderate economic growth. In their view, Europe will likely remain a source of volatility.
The future is impossible to predict and history doesn’t repeat itself. But, the newly-launched Asset Class Dashboard, which contrasts the current and historical returns for a sample of asset classes (represented by relevant indexes), can help you and your clients contextualize the current return environment.
According to our most recent Financial Professional Outlook survey, advisors report that many of their clients think the equity markets are scary. So scary, in fact, that 60% of respondents said clients are looking to reduce exposure to risk assets. But is this really a safer approach to fund future investment goals?
Recent mutual fund flows indicate that many investors have missed the equity market rally since 2009, as it appears they shifted investments out of equities and into bonds (based on the numbers shown). If investor emotions – rather than a change in investor goals – sparked this trend, it’s especially concerning.
Given fiscal uncertainties in the U.S. and pressure in the Eurozone, coming into 2013 few investors expected double-digit gains for U.S. equities in the new calendar year, let alone in its first quarter!
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