The year just passed delivered an unusually wide spectrum of results among the major asset classes. US equities were firmly in the lead, surging more than 30% in 2013. At the final bell for 2013, the biggest retreat was in commodities overall, which sunk more than 9%, based on the DJ-UBS Commodity Index.
In a year filled with an ample supply of surprising twists and turns, broad diversification remained competitive. The Global Market Index (GMI) was ahead last year by a bit more than 14%, dispensing a strong calendar-year performance and offering another reminder that outperforming Mr. Market’s asset allocation is as challenging as ever.
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For the lucky (smart?) few who managed to beat the odds, last year’s recipe for success came in two basic flavors: overweight developed-world stocks (US equities in particular) and/or go light on bonds. It’s anyone’s guess what 2014’s winning strategy will be. That doesn’t stop the pundits from offering advice. But before you go off the deep end and embrace a self-proclaimed oracle’s forecasts, ask yourself a simple question: How do his predictions from a year ago stack up today?
Speaking of predictions, here’s one that’s likely to stand the test of time: GMI’s performance in 2014 will remain above average when we tally the numbers a year from now vs. a broad span of actively managed efforts intent on generating superior results. History suggests that's a relatively safe forecast, which implies that you need a hefty dose of confidence (or hubris) to move dramatically away from Mr. Market's portfolio mix in the year ahead.