Published November 30, 2018
Recently, the following chart has been making the rounds. It shows that a full 90% of all 70 asset classes tracked by Deutsche Bank are delivering NEGATIVE returns for 2018 (as of mid-November). This is a record setting level of investor dismay; there has been almost nowhere to go for investors seeking a return on their money. Stocks, bonds, oil, gold – all negative year to date. Thus, having a typical diversified stock-bond portfolio has not helped this year. In fact, the diversification has worked against you as it has more than likely exposed your portfolio to negative returns rather than working to make sure you’re placed in something positive (see table at the bottom for a listing of diversified portfolio returns).
Of course, there are still just over four weeks to go in the year. A year-end rally would bring some domestic stock indexes back to positive on the year. For almost all other asset classes, it is highly unlikely they will reach positive ground.
Our focus Nasdaq 100 (QQQ) index is one of the few places where investors have found positive returns this year. Applying our TimingCube Turbo model to the QQQ has been even better, providing a solid +16% return this year. Our version of a broadly diversified portfolio, our FPResearch Multi-Asset model portfolio, stands just above breakeven for the year as we go to press this week. Multi-Asset uses individual sector/asset class models to invest in U.S. and emerging market stocks and bonds, real estate, gold, alongside defensive U.S. sectors like healthcare and consumer staples. Compare that breakeven return to the litany of red below – the Morningstar listing of diversified portfolios. In this very difficult year for almost every investible asset, we are thankful you have joined us here at TimingCube for what we hope has been a profitable year (so far) for our subscribers.
Morningstar list of diversified portfolio returns:
A key week for investors as stocks began the post-holiday week sitting near their correction low points. Monday provided a welcome respite with robust Thanksgiving sales breathing life into Amazon (AMZN) and a bounce in oil prices encouraging investors to buy the prior week’s dip. Stocks posted a +1.5% advance on the day. Stocks held firm Tuesday with a +0.3% close in the S&P 500, though small-cap stocks fell back -0.9%. Fed Chair Powell assuaged fears of faster interest rate hikes with comments Wednesday. Those soothing words sparked a major rally in stocks with the Nasdaq 100 (QQQ) bursting higher by almost +3%. Once again, stocks held the advance with Thursday’s trade seeing only a slight slip of -0.2% as investors turned their attention to the weekend’s meeting of G20 leaders, including a planned meeting between President Trump and Chinese leader Xi Jinping. Optimism over that meeting spurred further gains Friday with the indexes closing at their highest levels of the week, adding +0.6%.
Finally the bulls found some footing. After a dismal week, stocks bounced back strongly to recoup most all of the prior week’s losses. The S&P 500 (SPY) shot back with a +4.75% weekly gain. The Nasdaq 100 (QQQ) experienced a +6.41% boost. Small caps returned +3.23% (IWM) for the week. As of now, stocks are back where they were seven weeks ago, having dashed back and forth in volatile trade while interest rates have dropped back to their September levels.
Warm wishes and until next week.