Asset Class Scoreboard: Red October

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

Even if one of our favorite books/movies is the Hunt for Red October, it was a little disconcerting to see a sea of red on the asset class scoreboard in October, with nowhere to hide among traditional stocks and bonds or alternatives like Managed Futures, Hedge Funds, and Commodities. No quarter was given in the reddest October for investments since the depths of the financial crisis 10 years ago, October of 2008 (where managed futures were singing a decidedly different tune).

What happens from here is the big question. The previous 5 years have taught investors that stocks quickly rebound from these types of sell-offs. But this time sure does feel a bit different, if for no other reason than it is interest rate-driven. If we see continued weakness, look for managed futures to move from their short-term positive correlation to equities to a more negative correlation, while hedge funds remain correlated (but losing less than equities).

The US elections on November 6th could be a catalyst one way or the other, and everyone will be glued to their favorite network anxiously watching results. In the meantime, here's the October blood bath:

Past performance is not necessarily indicative of future results.

Source: All ETF performance data from Morningstar.com
Sources: Managed Futures = SocGen CTA Index

Cash = US T-Bill 13 week coupon equivalent annual rate, with YTD the average of each month's value,
Bonds = Vanguard Total Bond Market ETF (BND),
Hedge Funds = IQ Hedge Multi-Strategy Tracker ETF (QAI)
Commodities = iShares S&P GSCI Commodity-Indexed Trust ETF (GSG);
Real Estate = iShares U.S. Real Estate ETF (IYR);
World Stocks = iShares MSCI ACWI ex-U.S. ETF (ACWX);
US Stocks = SPDR S&P 500 Trust ETF (SPY)

Disclaimer

The performance data displayed herein is compiled from various sources, including BarclayHedge, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor's disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor's track record.

Benchmark index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship, self reporting, and instant history.

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