Asset Class Returns: "Emerging Markets" at the top
As promised, here's a snapshot of the returns of various asset classes, year-to-date. Observant readers will note that I'm only including those asset classes that are part of my asset allocation strategy, with gold thrown in at the end for fun. The very simple spreadsheet is here, linked under "Site Resources"
International stocks as a group outperformed almost every other asset class on the list, one exception being REITs (Real Estate Investment Trusts), whose high dividend payouts provided not only an income vehicle but also a return enhancement. Emerging Market stocks have really caught fire with investors worldwide, who hope to be where the action is, though, as Jeremy Siegel has pointed out, strategic and tactical overweights in these stocks might lead investors into what the Professor calls the "growth trap."
US stocks have become, at least for the past few months, highly correlated with government inflation-indexed bonds (TIPS), which makes one wonder again whether the Equity Risk Premium might be too high. Worth watching, particularly if a higher-inflation, slower growth economic environment unfolds in the US.
Meanwhile, international stocks have done some decoupling with US stocks, beating broad-index domestic stock returns by three to one so far this year, even without year-end income from my fund proxies added in, and even with a stronger dollar nullifying any currency effects on the asset prices.
We'll see where things go from here. Regardless, I'll be maintaining my own strategic allocation, periodically rebalancing, and not making any tactical plays, which can so often be sucker bets.