Major Assets Movement Bodes Well for Favorable Season

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Includes: AGG, BND, BWX, CRED, DBA, DBC, EEM, EFA, EMB, FRN, GLD, GSG, HYG, ICF, IEF, IWM, IYR, JNK, MBB, MUB, PCY, PHB, RWX, SHV, SPY, TLT, VEU, VNQ, VTI, VWO
by: MyPlanIQ

Major asset classes' return performance provides insights into asset movement. It plays an important role in a tactical asset allocation strategy such as our Tactical Asset Allocation. This is a report for the week ending on 12/03/2010.

The latest stock market rally bodes well for one of the strongest seasons for stock markets. It is well documented that stocks tend to do well at year end: the so-called Santa Claus rally.

Gold (NYSEARCA:GLD) and broad based commodities (GSG or DBC) made strong upward moves and are now among the top five assets that have the highest trend scores. US REITs (NYSEARCA:IYR) continued its relative weakness while international REITs (NYSEARCA:RWX) outperformed its US counter part and took the top fourth place. This was partly due to the dollar weakness.

Assets Class Symbols 12/03
Trend
Score
11/26
Trend
Score
Direction
Frontier Market Stks (NYSEARCA:FRN) 13.33% 14.18% v
Emerging Market Stks (NYSEARCA:VWO) 11.67% 7.85% ^
Gold (GLD) 11.1% 7.74% ^
International REITs (RWX) 10.73% 7.15% ^
Commodities (NYSEARCA:GSG) 10.22% 4.61% ^
US Stocks (NYSEARCA:VTI) 9.57% 7.64% ^
US Equity REITs (NYSEARCA:VNQ) 9.21% 10.71% v
International Developed Stks (NYSEARCA:EFA) 6.94% 3.67% ^
US High Yield Bonds (NYSEARCA:JNK) 4.81% 4.05% ^
Emerging Mkt Bonds (NYSEARCA:PCY) 3.14% 3.45% v
Intermediate Treasuries (NYSEARCA:IEF) 1.03% 2.34% v
International Treasury Bonds (NYSEARCA:BWX) 0.97% -0.15% ^
US Credit Bonds (CFT) 0.94% 2.06% v
Total US Bonds (NYSEARCA:BND) 0.59% 1.05% v
Treasury Bills (NYSEARCA:SHV) 0.03% 0.02% ^
Mortgage Back Bonds (NYSEARCA:MBB) -1.8% 1.55% v
Municipal Bonds (NYSEARCA:MUB) -1.81% -1.1% v
Click to enlarge

click to enlarge

The riskiest assets: Frontier Market Stocks (FRN) and Emerging Market Stocks (VWO or EEM) dominated the top two spots. Gold (GLD) had a big recovery last week, approaching an all time high again.

In the meantime, Municipal bonds (MUB), Mortgage Back Bonds (MBB) and Treasury bonds continued to slide. It is worthwhile to point out that even Emerging Market Bonds (PCY) had a negative trend score change, representing a buoyant attitude towards risk assets.

In conclusion, in the bigger uncertain context, we are now entering a favorable season for risk assets. A portfolio that has been positioned well will be able to take advantage of such an event.

Disclosure: I am Long VTI, IYR, LQD, EEM.