Diversified investors finally have something to be happy about. I can tell, because nobody called this quarter to ask (a.k.a. complain) about performance. (Aside – I’m kidding, this practically never happens, my clients are awesome!). What’s the reason? Here’s year to date performance of various asset classes.
Practically every major equity asset class is in-line with the S&P 500 year to date through 10/31/16. Small caps, emerging markets and commodities are actually ahead of large cap US stocks. So, for what feels like the first time in a long time, diversified investors have a reason to be happy.
So, it’s nice for a change! In a perfect world you’d have a diversified portfolio at its best when US markets are cratering, but we don’t get to live in that world. I don’t know what comes next. Maybe we’ll finally have a passing of the baton from the last many years of leadership from US stocks to something else, maybe international, maybe emerging markets. Maybe years of putting up with the pain of diversification will pay off in some relative outperformance. Maybe there will be a flu epidemic that shuts down the economy for three months, I really don’t know. Waves come and go, and some times the cycles are short and some times they are long. I’m not here to say what comes next. But for now it’s a nice reprieve, so let’s not overlook it.