Widespread Buying Lifted Nearly All Asset Classes Last Week

|
Includes: DJP, EMLC, TIP, VNQ, VNQI, VTI
by: James Picerno

Positive returns dominated the first week of trading in July for the major asset classes, based on a set of US-listed exchange-traded products. With the exception of broadly defined commodities, every corner of finanical markets posted gains for the trading week through July 6.

Securitized real estate securities in the US posted the strongest gain last week for the major asset classes. The Vanguard Real Estate ETF (NYSEARCA:VNQ) posted its third consecutive weekly advance by the close of trading on Friday, rising 1.9% and lifting the ETF to its highest price in nearly two years.

The only loss last week was registered in broadly defined commodities. The iPath Bloomberg Commodity Index Total Return ETN (NYSEARCA:DJP) fell 1.5%, leaving the exchange-traded note near its lowest close of the year to date.

For the one-year trend, US equities are far and away the best performer for the major asset classes. The Vanguard Total Stock Market ETF (NYSEARCA:VTI) posted a 17.5% total return for the trailing one-year window (252 trading days) at Friday's close. That's a healthy premium over the second-best one-year performer: foreign real estate/REITs via the Vanguard Global ex-U.S. Real Estate ETF (NASDAQ:VNQI), which is up 10.0% over the past 12 months.

The biggest one-year loser at the moment: bonds issued by governments in emerging markets. The VanEck Vectors J.P. Morgan EM Local Currency Bond ETF (NYSEARCA:EMLC) was off 3.0% at last week's close versus the year-earlier level.

FT reported on Friday that emerging market fixed-income funds suffered net outflows for the 11th week in a row, based on data published by EPFR, a data consultancy. "The combination of a stronger US dollar and weakening economic data have created a deteriorating backdrop for EM," advised Robert McAdie, global markets head of strategy at BNP Paribas.

Ranking the major asset classes by current drawdown reveals that broadly defined commodities continue to post the biggest peak-to-trough decline. DJP, at last week's close, was trading nearly 50% below its previous peak.

By contrast, inflation-indexed Treasuries are posting the smallest drawdown at the moment for the major asset classes. As of Friday's close, the iShares TIPS Bond ETF (NYSEARCA:TIP) is just 1.1% below its previous peak.