Q1 Asset Class Returns

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Includes: ACWX, BND, GSG, IYR, QAI, SPY
by: Jeff Malec

The first question we had to ask ourselves after looking at the returns in March was, "Are the asset classes becoming increasingly correlated?" Here's what happened in March by the numbers:

  • 7 of the 8 Asset Classes recorded positive returns in March
  • 4 of the 8 Asset Classes posted significant returns in March (Above 4%)
  • 10.32% - The return of Real Estate in March
  • 4 - Number of slots Real Estate moved up in the asset class scoreboard after March
  • 2nd place - Where Managed Futures currently ranks despite a down month in March

Real Estate:

A double-digit return in a month is something you cannot ignore. What's with Real Estate? The ETF we use (NYSEARCA:IYR) tracks 100 different real estate companies, but the rebound could have something to do with another asset class… bonds (interest rates).

Bonds:

Depending on what Bond Market you watch, it was a big month. With the ETF we use is only up around 3% on the year, but the High Yield bonds cracked the Top 25 for best all-time monthly performance {Disclaimer: Past performance is not necessarily indicative of future results}. For those that have been following along the low interest rate environment we've been living in for almost a decade, low interest rates are good for people looking to purchase a home or refinance their mortgage.

World Stocks, U.S. Stocks, and Commodities:

Is the fact that these three asset classes all moved in tandem in March a coincidence or are these markets showing their true colors or being highly correlated? Last Week, we charted the current rolling 30 day correlation of the S&P 500 has to Crude Oil and not only has the correlation been increasing, 2016 has shown the highest correlation over a two year period.

Managed Futures:

Finally, Managed Futures had a tough month with the U.S. Dollar experiencing a choppy downward market. Combine that with the $VIX returning to the lows we saw constantly throughout 2014 and some of 2015, and it was a struggle for managers to capture trends in choppy markets. We know the managers that we work with were long commodities but late reversals in the markets took away any gain made earlier in the month.

The good news is that combined with the strong first two months of 2016 is enough to keep Managed Futures in 2nd place, despite a down March.

Here's the full look at the Q1 performance of 8 asset classes.

Click to enlarge

Click to enlarge

(Disclaimer: past performance is not necessarily indicative of future results.)
Source: All ETF performance data from Morningstar.com
Sources: Managed Futures = SGA CTA Index, Cash = 13 week T-Bill rate,
Bonds = Vanguard Total Bond Market ETF (NYSEARCA:BND),
Hedge Funds= IQ Hedge Multi-Strategy (NYSEARCA:QAI)
Commodities = iShares GSCI ETF (NYSEARCA:GSG);
Real Estate = iShares DJ Real Estate ETF (IYR);
World Stocks = iShares MSCI ACWI ex US Index Fund ETF (NASDAQ:ACWX);
US Stocks = SPDR S&P 500 ETF (NYSEARCA:SPY)